UnW.!ll«^  of  CUComt^ 


DIGEST  of  LEGAL  OPLNIONS 

of 

THOMAS  B.  PATON,  General  Counsel  of  the  American  Bankers  Association, 

which  have  been  published  in  the  issues  of  the  Journal  of  the  American 

Bankers  Association  from  July,  1908,  to  June,  1919,  inclusive 

With  an  Index 


Digested  by 

THOMAS  B.  PATON,  Jr. 

of  the  New  York  Bar,  Assistant  to  the  General  Counsel 


Published  by  the 

AMERICAN  BANKERS  ASSOCIATION 

5  Nassau  Street 

New  York 

1919 


ri<- 


:50/ 


Copyright,  1919 

by  the 

American  Bankers  Association 

New  York 


PREFACE 

FROIVI  July,  1908,  to  June,  1919,  there  have  been  published  in  the  Journal  of  the  American 
Bankers  Association  the  legal  opinions  of  its  General  Counsel.  Inasmuch  as  there  have 
accumulated  during  the  past  eleven  years  as  many  as  1,346  of  these  opinions,  it  was 
thought  advisable  by  the  Executive  Council  in  the  interests  of  all  the  members  that  a  digest 
of  them  be  made  and  pubUshed.  Accordingly  this  Digest  has  been  prepared  and  an  attempt 
has  been  made  in  each  case  to  write,  in  concise  form,  a  statement  of  the  facts,  followed  by 
the  opinion.  It  seemed  best  from  the  busy  banker's  point  of  view,  not  to  deal  too  much 
in  detail  in  a  book  of  this  kind  but  rather  to  state  in  a  terse  way  the  conclusions  which  a 
banker  or  other  business  man  may  wish  to  know,  without  taking  the  time  to  read  through 
the  citations  of  legal  decisions  or  the  discussion  of  underlying  principles  or  reasons  upon 
which  the  opinions  are  based.  A  fuller  treatment  of  the  subject  quoting  the  basic  legal 
authorities  or  discussion  can  always  be  had  by  referring  to  the  full  text  from  which  the 
digest  was  made. 

For  the  variety  of  subjects  treated  and  their  practical  bearing  upon  banking  operations, 
the  bankers  are  solely  responsible  as  it  is  they  who  have  voluntarily  submitted  questions 
on  the  problems  confronting  them  in  every  day  business.  It  would  then  seem  to  follow 
that  the  book  has  the  advantage  of  containing  a  selection  of  subjects  confined  to  those  mat- 
ters only  which  have  been  troubling  bankers  most  and  which  have  already  proved  of  suf- 
ficient interest  to  cause  them  to  request  legal  advice. 

It  is,  of  course,  understood  that  the  opinion  of  a  lawyer,  even  though  based  on  de- 
cisions of  the  courts  of  last  resort  or,  in  the  absence  of  legal  precedent,  reasoned  out  upon 
sound  legal  principles,  still  remains  an  opinion.  At  most  the  reader  can  choose  to  use  it 
and  to  depend  upon  it  as  a  possible  guide  and  source  of  information,  and  for  these  objects 
this  book  is  published. 

Thomas  B.  Baton,  Jr. 

New  York,  N.  Y.,  July  1,  1919. 


ACCEPTANCE  AND  CERTIFICATION 


Certification  after  banking  hours 

1.  (Ala.)  A  bank  certifies  or  pays  a 
customer's  check  after  banking  hours  and 
the  customer,  before  banking  hours  of  the 
next  day  seeks  to  stop  pa}Tnent.  The  ques- 
tion was  raised  whether  the  payment  or 
certification  was  binding  on  the  customer. 
Opinion:  Sucli  payment  or  certification  is 
probably  valid,  although  the  point  has  never 
been  directly  passed  upon  by  the  courts  in  a 
case  between  the  customer  and  the  bank. 
Vol.  5,  p.  19,  July,  1912. 

Acceptance  must  be  written 

2.  (Ark.)  A  livestock  company  in- 
structed its  bank  to  honor  a  draft  drawn 
in  its  name  by  C  and  D,  who  were  buying 
stock  for  it,  and  the  bank  agrec<l  to  such  in- 
struction, telephoning  a  prospective  seller  of 
live  stock  that  the  check  for  $4,000  was  good. 
Eelying  on  this  oral  promise  to  pay  the 
amount,  the  cattle  are  turned  over  to  C  and 
D.  Later,  the  live  stock  company  stopped 
payment  on  the  check,  claiming  that  C  and 
D  had  no  authority  to  draw  it  or  to  buy  so 
large  an  amount  of  stock.  The  holder  seeks 
to  hold  the  bank  liable  on  its  statement. 
Opinion:  While  a  bank  which  promises  over 
the  telephone  to  pay  a  check  cannot  be  held 
on  such  promise,  the  acceptance  not  being 
in  writing,  the  bank  may  be  held  liable  to 
the  holder  Avhcre,  by  agreement  between  the 
bank  and  depositor,  the  deposit  is  aj)i)ropri- 
ated  for  the  paymciit  of  such  check.  If  there 
are  special  circumstances  from  which  it 
would  appear  that  the  depositor  assigned  a 
certain  amount  of  his  deposit  witli  the  con- 
sent of  the  bank,  the  latter,  although  it 
could  not  be  held  liable  as  acceptor  of  the 
check,  might  be  held  as  trustee  of  a  specific 
deposit  or  as  a  debtor  to  the  assignee  for  the 
amount  so  assigned.  Vol.  9,  p.  827,  Ajiril, 
1917. 

3.  (111.)  A  bank  was  requested  to  cer- 
tify check  by  wire.  It  refused  on  the  alleged 
ground  that  the  check  did  not  transfer  tlie 
funds  until  it  reached  the  bank  and  that  the 
depositor  could  revoke  the  paynieiit  after  it 
was  certified.  Opinion:  A  bank  can  certify 
by  wire  and  after  such  certification  the 
drawer  has  no  right  to  stop  payment.  While 
an  acceptance,  to  be  valid,  must  be  in  writing, 
there  is  no  requirement  that  the  acceptance 


in  all  cases  must  be  written  on  the  bill.    Vol. 
10,  p.  4GG,  Dec,  1917. 

4.  (Ind.)  In  all  states  where  the  Negoti- 
able Instruments  Law  is  in  force  and  in  other 
states  where  the  statutt>s  require  acceptance 
to  be  in  writing,  a  promise  over  the  telephone 
to  pay  a  check,  not  being  in  writing,  does 
not  bind  the  drawee;  but  in  Indiana  where 
the  common  law  rule  prevails  that  verbal 
acceptances  are  valid,  such  telephone  promise 
would  probably  bind  the  drawee  in  favor  of 
one  who  in  reliance  thereon  cashed  the 
check.  Where,  however,  the  drawee  simply 
answers  that  the  check  is  ''good''  or  "all 
right"  without  coupling  with  such  answer 
any  specific  promise  to  pay,  such  answer  is 
insufficient  to  bind  the  bank  as  an  acceptor. 
Vol.  3,  p.  337,  December.  191(». 

Note:  The  Negotiable  Instruments  Law  re- 
quiring acceptances  to  be  in  writing  was  passed 
in   Indiana  in  April,   1913. 

5.  (Ohio)  The  indorser  of  a  check  at- 
tempted to  cash  it  at  Bank  A,  which  bank 
as  a  precaution  teleplioned  Bank  P,  the 
drawee.  In  reply  to  tlie  question  whether  or 
not  the  check  was  good,  Bank  P  said  "yes,'' 
and  when  asked  if  it  would  protect  Bank  A 
on  the  check,  it  replied  over  the  telephone, 
"We  will.''  Bank  A  cashed  the  check  on 
these  representations  and  upon  dishonor 
wishes  to  hold  the  drawee  liable,  because  the 
indorser  proved  wothless.  Opinion:  Bank  A 
cannot  hold  Bank  P  on  the  hitter's  oral 
promise  to  pay  the  check,  because  the  Nego- 
tiable Instruments  Act  requires  acceptance  to 
be  in  writing;  nor  is  Bank  P  l)ound  to  Bank 
A,  the  holder,  who  has  cashed  tiie  check  on 
faith  of  such  promise,  on  the  principle  of 
estoppel,  as  this  principle  is  inaj)plicable  in 
tlie  face  of  positive  statutory  nx|uiremcnt  of 
written  acceptance.  Bank  .\,  however,  would 
liave  a  right  of  recoverv  against  the  drawer  of 
the  check.     Vol.  7,  p."  165,  Sept.,  ^'^\■\. 

6.  (Okla.)  A  bank  purchased  a  chock 
from  the  payee  after  receiving  a  statement 
over  the  telephone  Ity  the  drawee  that  the 
check  was  good.  Payment  wa*;  stopped. 
Opinion:  Umler  the  leading  case  construing 
the  Negotial)l(>  Instruments  Law  of  Colorado, 
the  bank  had  no  recourse  upon  non-payment 
against  the  drawee,  as  certification  over  the 
telephone  is  invalid,  not  being  in  writing. 
The  bank's  sole  recourse  is  against  the 
drawer  and  payee.    Vol.  5,  p.  104,  Aug.,  1912. 


7] 


DIGEST  OK  LKdAL  OPINIONS 


7.  (Tex.)  All  nccoptaiicc  of  a  check  or 
(Inift  l)y  ti'k'pliono  in  Texas  is  valid,  because 
there  is  no  Nej^otiable  Instruments  Act,  or 
any  otiier  statute  in  force  requirinj^  accept- 
ances to  he  in  writing'.  Vol.  (i,  p.  ;'>:{,  July, 
1913. 

Notk:  Tlic  Negotiable  IiiHtnimcntH  I.aw  re- 
quiring aceej)tances  to  l)e  in  writing  was  passed 
in   Texas   in   Marih,    1919. 

Acceptance  on  note 

8.  (Pa.)  A  re«j;ular  form  of  a  negoti- 
able promissory  note,  made  by  A  payable  to 
his  own  order  forty-five  days  after  date  at 
the  X  bank,  was  indorsed  in  blank  by  A. 
Across  the  face  the  following  acceptance  was 
written  by  a  third  party:  "Accepted  payable 
at  the  X  bank,  signed  B."  The  question  is 
asked  what  is  the  liability  of  the  acceptor. 
Opinion:  Where  a  third  person  whites  an 
acceptance  across  the  face  of  a  promissory 
note,  the  holder  has  the  option  of  treating 
the  instrument  as  either  a  bill  or  note  and 
the  person  so  signing  can  be  held  liable  as 
acceptor  of  a  bill  of  exchange.  Vol.  10,  p. 
528,  Jan.,  1918. 

Bank's  obligation  to  pay,  not  to  certify 
See  24 

9.  (Iowa)  A  check  was  presented  at 
the  drawee  bank  at  a  time  when  there  were 
sufficient  funds.  The  drawee  returned  it  for 
proper  indorsement  and  inquires  if  it  was 
under  obligation  to  first  certify  the  check 
in  case  of  subsequent  depletion  of  the 
maker's  account.  Opinion:  The  certification 
is  optional  not  obligatory,  and  the  bank 
would  not  be  liable  for  refusal  to  certify,  if 
the  check  in  this  case  thereafter  became  "not 
good."     Vol.  2,  p.  538,  June,  1910. 

10.  (Mass.)  A  customer  gave  instruc- 
tions to  his  bank  not  to  certify  any  of  his 
checks  and  the  bank  desires  to  know  if  there 
is  any  ruling  which  makes  it  compulsory  for 
the  bank  to  certify  upon  demand  if  the  funds 
are  sufficient.  Opinion:  The  bank  is  not 
obliged  to  certify  a  check  when  requested. 
Its  only  obligation  is  to  pay.  The  customer's 
instruction  is  sufficient  reason  for  the  bank's 
refusal.     Vol.  5,  p.  28,  July,  1912. 

11.  (Pa.)  A  check  made  payable  to  a 
firm  was  brought  to  the  bank  by  the  firm's 
agent  with  the  request  that  it  be  certified. 
The  bank  doubted  the  authority  of  the  agent 
and  refused  to  certify.  Opinion:  Certifica- 
tion is  a  matter  of  favor  on  the  bank's  part 
and  cannot  be  claimed  as  a  right.  Vol.  4, 
p.  681,  May,  1912. 


Certified  checks  post-dated 

12.  (Nev.)  A  bank  certified  a  post- 
dated clieck  before  its  date  at  the  request  of 
tlio  iiolder.  The  bank  questions  its  responsi- 
bility should  it  refuse  another  check  not 
post-dated,  which  would  have  been  good  but 
for  the  certification  of  the  post-dated  check. 
Opinion:  The  bank  has  no  right  to  pay  or 
certify  a  post-dated  check  at  the  request  of 
tlie  holder,  before  its  date  and  .so  acts  at  its 
peril.  Such  certification  at  tiie  request  of 
the  drawer  is  also  held  irregular,  although  in 
Idaho,  it  is  held  proper,  if  the  funds  are 
sufficient,  when  the  amount  becomes  im- 
mediately chargeable  to  his  account  and  pay- 
able to  the  holder  irrespective  of  the  date. 
Vol.  5,  p.  750,  May,  1913. 

13.  (Ark.)  A  check  payable  to  A  was 
post-dated  December  1,  1912,  and  was  certi- 
fied June  1,  1912,  before  its  date.  It  was 
delivered  to  a  trustee  in  escrow.  The  trustee 
in  breach  of  the  trust  delivered  it  to  A,  who 
negotiated  it  to  a  purchaser  for  value  four 
months  after  its  date.  Opinion:  It  might 
be  held  by  the  courts  (1)  that  the  irregular 
certification  put  the  purchaser  on  inquiry, 
or  (2)  that  the  check  was  overdue  when 
negotiated,  so  as  to  deprive  the  purchaser  of 
the  status  of  a  bona  fine  holder.  If  such 
were  held,  the  check  in  the  hands  of  the 
purchaser  would  be  subject  to  the  same  de- 
fenses as  if  held  by  the  payee.  Vol.  6,  p.  210, 
Sept.,  1913. 

14.  (Okla).  A  gave  B  a  check  post- 
dated. B  wTote  to  the  bank  on  which  it  was 
drawn,  asking  that  payment  be  guaranteed. 
The  cashier  sent  B  a  written  guaranty  that 
the  check  wiU  be  paid  when  due.  Opinion : 
The  cashier  has  no  authority  to  certify  a  post- 
dated check  before  the  due  date  and  a  holder 
taking  with  notice,  cannot  recover  thereon 
from  the  bank.  In  this  case  B  could  not 
hold  the  bank  upon  its  cashier's  letter.  Vol. 
8,  p.  322,  Oct.,  1915.    See  180. 

Certification  equivalent  to  acceptance 

15.  (N.  H.)  The  Negotiable  Instru- 
ments Law  of  New  Hampshire  requires  that 
"an  acceptance  must  be  in  writing"  and 
further  provides  that  "certification  is  equiva- 
lent to  an  acceptance."  Vol.  4,  p.  375,  Dec, 
1911. 

Certifying  bank's  liability  to  fraudulent 
holder 

16.  (Conn.)  According  to  a  New  Jer- 
sey decision,   a  certifying  bank  can   refuse 


ACCEPTANCE  AXD  CERTIFICATION 


24 


payment  to  a  fraudulent  holder  where  a 
check  has  been  certified  for  the  drawer,  but 
cannot  so  refuse  where  the  certification  is 
for  the  holder.  If  this  decision  is  sound  law, 
there  might  be  a  desirability  for  separate 
certification  stamps  to  indicate  for  whom  the 
check  was  certified.  An  Ohio  decision  ignores 
this  distinction  and  holds  that  a  bank  must 
pay  fraudulent  holder  whether  the  check  is 
certified  for  the  drawer  or  for  the  holder. 
Vol.  5,  p.  740,  May,  1913. 

Drawer's  liability  on  accepted  draft 

17.  (Tex.)  A  draft  was  drawn  by  Smith 
and  Company  on  Jones  &  Company  at  sixty 
days'  sight  and  accepted  by  Jones  &  Com- 
pany. Opinion:  The  effect  of  the  acceptance 
is  not  to  discharge  the  drawer  but  to  con- 
stitute the  acceptor  the  principal  debtor. 
In  Texas,  the  liability  of  the  drawer  of  an 
accepted  draft  is  fixed  by  due  protest  and 
notice,  or  without  protest,  by  suit  against 
the  acceptor  as  provided  for  by  statute. 
Vol.  8,  p.  326,  Oct.,  1915. 

Certification  of  forged  checks 
See  21,  47 

18.  (111.)  A  bank  certified  checks  bear- 
ing forgery  of  the  payee's  indorsement.  The 
checks  were  purchased  by  another  bank  which 
received  payment  therefor.  Opinion:  The 
certifying  bank  does  not  warrant  the  gen- 
uineness of  the  pa5'ee's  indorsement  and  is 
not  responsible  to  the  purchaser.  If  money 
is  paid  by  the  certifying  bank  thereon,  it 
may  be  recovered.  Vol.  5,  p.  590,  March, 
1913. 

19.  (Kan.)  A  forged  check  was  given 
in  payment  of  a  diamond  ring.  Before  ac- 
cepting the  check,  the  seller  required  a 
responsible  indorser,  and  the  latter  before 
indorsing  the  check  telephoned  the  bank 
which  promised  to  pay  the  check.  The  bank 
did  not  pay  the  forged  check.  Opinion: 
The  bank's  promise  to  pay  was  not  binding 
where  the  check  was  a  forgery,  as  its  promise 
related  to  a  valid  check;  even  in  case  of  a 
valid  check,  the  bank  would  not  be  bound 
because  its  promise  was  not  in  writing.  Vol. 
2,  p.  153,  Oct.,  1909. 

20.  (Pa.)  A  bank  certified  its  custom- 
er's check,  wliich  remained  outstanding  and 
which  was  claimed  by  the  drawer  to  be  forged. 
The  bank  doubted  the  fact  of  forgery  and  re- 
fused to  reimburse  its  customer's  account. 
Opinion:  If  the  check  remains  outstanding 
the  bank  in  a  suit  by  the  customer  would  be 


held  liable  for  the  amount  of  the  deposit, 
for  his  positive  testimony  of  the  forgery 
would  probably  outweigh  the  presumption  of 
genuineness  arising  from  the  fact  of  certifi- 
cation.   Vol.  6,  p.  576,  Feb.,  1914. 

Certification    guarantees    signature    and 
sufficiency  of  funds 

21.  (N.  J.)  A  bank  certified  a  check 
payable  to  a  specified  person  for  a  stranger 
who  was  not  entitled  'to  tivic  instrument. 
The  holder  negotiated  the  check  under  a 
forged  indorsement  to  an  innocent  purchaser 
for  value.  Opinion:  The  certifying  bank 
binds  itself  that  there  are  sufficient  funds  to 
pay  the  check  and  guarantees  the  genuine- 
ness of  the  drawer's  signature.  The  bank  is 
not  responsible  to  the  innocent  purchaser 
because  (1)  it  does  not  guarantee  the  gen- 
uineness of  the  payee's  indorsement,  and  (2) 
it  is  not  negligent  in  certifying  a  check  for 
an  unidentified  person.  Vol.  9,  p.  582,  Jan., 
1917. 

Holder  in  due  course 

22.  (Okla.)  A  check  to  drawer's  order 
was  certified  for  the  drawer,  who  indorsed  it 
to  B.  B  cashed  the  item  at  the  D  bank.  The 
drawer  upon  learning  that  B  was  guilty  of 
fraud,  stopped  pa}'ment,  and  the  certifying 
bank  refused  to  pay  the  D  bank.  Opinion: 
D  bank  paid  value  to  B  for  the  certified  check 
without  notice  of  the  fraud  and  as  a  holder 
in  due  course  can  recover  from  the  certify- 
ing bank.  Had  B  presented  the  check  to 
the  drawee  some  (but  not  all)  authorities 
hold  tluit  the  certifying  bank  could  refuse 
payment  and  plead  in  defense  the  fraud  upon 
its  depositor.  Vol.  6,  p.  820,  June,  1914. 
See  21,  55. 

Indorsement  must  be  properly  made 
See   42,   380 

23.  (Cal.)  A  check  for  $5,000  wa^^ 
presented  at  the  drawee  bank  and  payment 
was  refused  because  tlie  check  was  not  in- 
dorsed. The  presenting  bank  then  indorsed 
the  payee's  name  for  the  payee  and  again 
presented  the  thcck  which  was  again  refused. 
The  holder  demanded  tliat  the  bank  certify 
the  check.  Opinion:  The  drawee  bank  was 
under  no  obligation  to  the  holder  to  certify 
the  check.  Its  only  obligation  was  to  pay 
when  dulv  presented.  Vol.  5,  p.  311,  Nov., 
1912. 

24.  (N.  Y.)  A  bank  although  in  funds 
refused  payment  of  a  check  because  it  lacked 


25 


DIGEST  OF  LEGAL  OPINIONS 


tlic  payee's  indorsement.  Later,  when  the 
check  properly  indorsed  was  presented,  there 
were  no  funds  to  meet  it.  The  holder  claimed 
that  drawee  was  liable  for  failure  to  certify 
the  check  in  Ihe  first  instance.  Opinion: 
The  hank  was  not  obliged  to  certify,  but  only 
to  pay.  Banks  frcfiuently  certify  such  checks 
"n^ood  wlicn  jiroperly  indorsed,"  but  do  so 
})urelv  out  of  accommodation.  Vol.  2,  p. 
188,  Nov.,  1909. 

25.  (Pa.)  A  bank  received  through  the 
mail  a  check  drawn  on  one  of  its  customers, 
but  whicli  was  improperly  indorsed.  The 
bank  returned  the  check  for  correction  and  in 
the  meantime  the  customer  reduced  his  ac- 
count so  that  check  was  not  good.  Opinion: 
The  drawee  bank  is  not  liable  to  the  holder 
for  failure  to  certify  the  check  before  return- 
ing it  for  proper  indorsement.  Many  banks 
do  certify  "good  when  properly  indorsed" 
but  the  bank  is  under  no  obligation  to  certify 
a  check.    Vol.  7,  p.  165,  Sept.,  1914. 

Immediately  charging  customer's  account 

26.  (D.  C.)  A  bank  certified  a  check 
payable  to  a  distant  firm  at  the  request  of 
the  holder  who  was  its  traveling  salesman.  Of 
this  fact  the  depositor  was  ignorant.  The 
depositor  believing  that  the  check  could  not 
be  presented  for  several  days,  drew  a  second 
check,  which  overdrew^  the  account  because 
of  the  certification.  He  threatened  suit  for 
damages  because  of  the  bank's  refusal  to  pay. 
Opinion:  The  bank  had  the  right  to  certify 
the  first  check  when  presented  by  the  holder 
and  immediatelv  charge  same  to  the  custom- 
er's account.  Vol.  5,  p.  170,  Sept.,  1912. 
See  55. 

Language  expressing  certification 

construed 

See  4,  35,  36 

27.  (Cal.)  A  bank  in  which  A.  Brown 
is  a  depositor  sent  the  following  telegram, 
"Check  of  A.  Brown  for  five  hundred  dollars 
now  good."  Opinion:  This  telegram  would 
not  constitute  a  sufficient  acceptance  to  bind 
the  bank.  It  is  not  an  absolute  promise  to 
pay,  and  there  is  an  implication  that  the 
bank  would  not  answer  for  B^o^^^l's  check 
aft^r  sending  the  wire.  Vol.  9,  p.  147,  Aug., 
1916. 

28.  (Ind.)  The  drawee  of  a  check  in 
answer  to  an  inquiry  by  the  holder  replied 
over  the  telephone  simply  that  the  check  was 
good.  Notwithstanding  a  subsequent  stop 
payment  order,  the  check  w^is  paid.  Opinion : 


Jn  Indiana,  where  the  Negotiable  Instru- 
ments Law  has  not  been  enacted,  oral  accept- 
ances are  valid.  But  it  is  doubtful  if  the 
mere  oral  answer  that  a  check  is  good,  so 
clearly  indicates  an-  absolute  promise  to  pay 
as  to  be  binding  as  an  acceptance.  Vol.  3, 
p.  675,  May,  1911. 

Note:  Tlie  Ncf^otiahle  Instruments  Law  wliich 
requires  acci'ptaiieeH  to  he  in  writing  wae  passed 
in   Indiana  in  April,   1913. 

29.  (Mo.)  A  bank  received  a  wire: 
"Will  you  pay  check  signed  A,  $335?"  and 
replied  by  wire,  "A's  check  good  for  amount." 
Opinion:  The  reply  will  be  held  an  accept- 
ance binding  the  bank  to  })ay  check  to  a  bona 
fide  liolder  who  has  purchased  same  on  faith 
thereof.     Vol.  6,  p.  33,  July,  1913. 

30.  (N.  M.)  A  check  may  be  accepted 
by  telegram  which  is  a  sufficient  compliance 
with  the  statutory  requirement  that  accept- 
ance must  be  in  writing,  but  to  be  binding 
the  telegram  must  clearly  import  an  absolute 
promise  to  pay.  Where  a  bank  wired,  "Will 
you  pay  A's  check  on  you  $100  ?"  and  the 
drawee  wired  reply,  "A's  check  on  us  good 
for  $100."  Opinion:  That  the  reply  wire 
sufficiently  imports  an  absolute  promise  to 
pay  and  is  binding  as  an  acceptance.  Vol. 
10,  p.  527,  Jan.,  1918. 

31.  (N.  Y.)  In  reply  to  a  telegram  ask- 
ing "Is  John  Smith  good  on  your  books  for 
$50?"  A  bank  answered  by  wire  and  con- 
firmed by  letter  as  follows :  "John  Smith 
good  on  our  books  for  $50  today."  When 
the  check  reached  the  bank  it  was  refused 
because  the  funds  had  been  withdrawn. 
Opinion:  The  bank's  wire  confirmed  by  letter 
was  not  binding  on  the  bank  as  an  acceptance. 
It  was  not  a  promise  but  merely  a  statement 
of  fact  as  to  the  condition  of  the  customer's 
account  on  a  given  dav.  Vol.  4.  p.  680,  Mav, 
1912. 

32.  (Okla.)  A  bank  before  advancing 
value  in  reliance  upon  a  telegram  concern- 
ing some  particular  check  should  see  that  the 
answer  by  wire  contains  or  imports  an  ab- 
solute and  unequivocal  promise  to  pay.  For 
the  wording  of  telegrams  illustrating  this 
point,  see  Vol.  3,  p.  338,  Dec,  1910. 

33.  (Okla.)  A  drew  two  checks  of 
$303.40  and  $75  respectively  and  had  his 
bank  wire  the  purchasing  bank  as  follows: 
"We  will  honor  Mr.  A's  draft  for  $400  this 
attached."  Later  A  stopped  payment  and  A's 
bank  refused  to  pay  the  amount  claiming  that 
its  acceptance  was  of  a  single  draft  of  $400 
and  did  not  accept  the  particular  checks  of 


ACCEPTANCE  AXD   CERTIFICATIOX 


41 


amount  less  than  $400.  Opinion:  The  drawee 
is  not  bound  to  honor  the  two  checks,  as  an 
agreement  to  pay  a  single  draft  of  $400  would 
not  bind  the  bank  to  pay  two  drafts  of  a 
lesser  amount.     Vol.  1,  p.  367,  April,  1909. 

34.  (Tex.)  Bank  A  phoned  Bank  B 
saying  that  C  wants  to  draw  on  Bank  B  and 
is  informed  that  C  has  no  credit  with  Bank 
B.  Thereupon,  Bank  A  reads  a  letter  from 
C  stating  that  he  will  be  at  Bank  B's  place 
before  the  draft  reaches  and  will  give  security 
for  the  draft.  Bank  B  replied,  "let  him  draw 
draft  then."  Opinion:  Although  an  oral 
acceptance  is  binding  on  the  drawee  in  Texas, 
Bank  B's  promise  should  be  construed  as  a 
conditional  promise  to  pay  after  C  docs  what 
he  says  he  Avill  do,  and  wliere  C  lias  not  per- 
formed the  condition,  Bank  B  will  not  l)e 
liable.    Vol.  4,  p.  490,  Feb.,  1912. 

Note:  The  Negotiable  Instruments  Law  re- 
quiring acceptances  to  be  in  writing  was  passed 
in   Texas   in   March,   1919. 

Letters  "O.  K."  as  certification 

35.  (Ark.)  Opinion:  The  letters  "0.  K." 
placed  on  check  with  signature  of  certifying 
oflficer  constitute  a  certification  equally  as 
if  "good"'  were  written,  and  if  placed  upon 
an  overdraft,  contrary  to  provisions  of  the 
National  Bank  Act,  would  subject  officer  to 
criminal  penalty.    Vol.  G,  p.  269,  Oct.,  1913. 

36.  (Cal.j  The  letters  "0.  K."  were 
placed  on  a  check  by  the  Vice-President  of 
the  drawee  bank  over  his  signature,  there  be- 
ing no  funds  on  deposit  at  the  time  to  meet 
the  check.  Tlie  understanding  was  that  the 
maker  of  the  check  would  deposit  sufficient 
funds.  Payment  was  refused.  Opinion: 
The  "0.  K."  of  the  Vice-President  would 
constitute  a  certification  provided  the  officer 
had  power  or  authority  to  certify.  Where  tlio 
check  was  certified  witliout  funds,  the  bank 
is  liable  to  the  bona  fide  payee  for  value. 
Vol.  3,  p.  587,  April,  1911. 

Limitation  as  to  time 

37.  (N.  Y.)  A  l)ank  ccrtiluation  stamp 
bears  the  clause  "good  if  presented  within  six 
months."  Upon  the  supposition  tliat  the 
bank  after  the  expiration  of  tlie  six  months 
repaid  the  funds  to  its  depositor  wlio  claimed 
he  had  lost  the  certified  check,  and  later  the 
check  was  presented  l)y  a  holder  in  due  course, 
the  bank  inquires,  first,  as  to  the  legal  effect 
of  such  a  clause  and,  second,  would  the  inser- 
tion of  the  clause  afford  it  better  protection 
than  if  it  was  omitted.     Opinion:  In  the  ab- 


sence of  judicial  interpretation,  the  contract 
would  probably  be  construed  not  as  relieving 
the  bank  entirely  from  its  promise  to  pay 
after  six  months,  but  as  permitting  the  bank, 
if  the  check  is  afterwards  presented,  to  plead 
any  equities  which  it  might  have  in  defense 
of 'payment.     Vol.  11,  p.  484,  March,  1919. 

38.  (Pa.)  A  bank  uses  a  certification  stamp 
which  reads  ''good  if  presented  within  five 
days"  with  a  place  and  date  of  certification. 
It  has  adopted  this  form  as  protection  against 
a  possible  form  of  fraud  wherein  the  deposi- 
tor after  issuing  his  check  to  a  confederate 
who  procures  its  certification,  claims  forgery 
and  obtains  the  amount  from  the  bank,  after 
which  the  check  is  negotiated  to  a  bona  fide 
holder.  The  bank  asks  whether  such  condi- 
ti{»nal  form  of  certification  is  valid  and 
whether  it  could  refuse  payment  if  the  check 
was  presented  after  five  days.  Opinion: 
Such  form  of  certification  is  valid  and  would 
seem  to  have  utility  in  affording  the  desired 
protection.  In  a  case  where  the  bank  cred- 
ited the  money  to  the  depositor  after  the  ex- 
]»iration  of  the  period  of  certitication,  it  would 
be  relieved  from  liability  and  whatever 
recourse  the  bona  fide  holder  would  have 
would  be  solely  against  the  drawer.  Vol.  G, 
p.  576,  Feb.,  1915. 

Outstanding  certified  checks 
See   340 

39.  (Pa.)  A  bank  certified  a  check  pay- 
able to  a  corporation  at  the  request  of  its  cus- 
tomer. The  check  has  been  out>?tanding  five 
years  and  never  presented.  Opinion:  In 
Pennsylvania, the  statute  of  limitations  begins 
to  run  against  the  holder  from  the  date  of  the 
bank's  refusal  to  j>ay.  The  bank  remains 
liable  to  pay  the  check  until  the  statute  comes 
to  its  relief.     Vol.  5,  p.  449,  Jan.,  1913. 

40.  (Pa.)  The  provision  of  the  Nego- 
tiable Instruments  Law  that,  where  an  instru- 
ment is  jiayable  on  demand,  jiresontation 
must  be  made  within  a  reasonable  time  after 
its  issue,  has  reference  only  to  charging 
])arties  contingently  liable.  A  \n\uk  remai.is 
liable  on  an  outstanding  certified  check  until 
the  statute  of  limitations  comes  to  its  relief, 
and  such  statute  does  not  begin  to  run  until 
pavment  of  the  check  has  been  demanded  and 
refused.     Vol.  5,  p.  449,  Jan.,  1913. 

41.  (Pa.)  A  bank  certified  the  check  of 
its  dejKisitor  in  favor  of  an  attorney  who 
acted  as  bondsman  for  the  depositor.  The 
check  was  lost  and  lias  remained  outstanding 
for  ten  years,  and  at  the  same  time  the  do- 


42 


DICIEST  OF  LEGAL  OPINIONS 


])osit  is  not  released.  Opinion:  The  certified 
(;lu'(;k  is  not  outlawed  iu  PLMinsylvania  until 
six  years  after  payment  has  l)('en  demanded 
and  the  hank  heforc  payinj,'  the  amount  of 
the  deposit  represented  hy  the  lost  certified 
check  is  entitled  to  satisfactory  indemnity,  or 
conclusive  proof  of  its  destruction.  Vol.  7, 
p.  4i)0,  Jan.,  11)15. 

42.  (Mont.)  A  check  to  the  drawer's 
order  was  certified  for  the  drawer.  The  drawer 
delivered  the  check  without  indorsement  to  a 
third  person  at  an  auction  sale  hefore  he  be- 
gan bitlding.  Through  some  misunderstand- 
ing the  dealings  fell  through.  On  present- 
ment of  the  check  by  the  holder,  payment  was 
refused  by  the  drawee  because  it  lacked  the 
payee's  indorsement.  The  check  remains  out- 
standing and  the  drawer  wants  the  use  of 
his  money.  Opinion:  The  drawee  bank  is 
not  liable  to  the  holder  of  the  check,  as  one  of 
the  conditions  of  certification  upon  which  the 
bank's  obligations  to  pay  depends,  is  that  the 
check  shall  be  indorsed  by  the  drawer,  who  is 
also  payee.  To  release  his  money,  the  drawer 
may  bring  replevin  to  recover  the  check,  or  he 
may  give  the  bank  satisfactory  indemnity 
against  the  possibility  that  the  check  may 
thereafter  be  presented  properly  indorsed. 
Vol.  7,  p.  165,  Sept.,  1914. 

Rule  of  twenty-four  hours  for  acceptance 

43.  (Conn.)  Opinion:  The  section  of 
Negotiable  Instruments  Law  allowing  drawee 
twenty-four  hours  after  presentment  in  which 
to  decide  whether  or  not  he  will  accept,  does 
not  apply  to  sight  drafts  which,  under  the 
law,  are  payable  on  demand,  and  collect- 
ing bank  is  not  obliged  to  hold  twenty-four 
hours  for  convenience  of  drawee.  Possible 
doubt  created  bv  law  can  be  cured  bv  amend- 
ment.    Vol.  3,  p.  82,  Aug.,  1910. 

44.  (Kan.)  The  rule  allowing  the  drawee 
twenty-four  hours  to  decide  whether  to  accept 
is  not  applicable  to  checks  or  demand  drafts, 
but  only  to  drafts  legally  presentable  for  ac- 
ceptance.    Vol.  6,  p.  432,  Dec,  1913. 

45.  (Miss.)  The  drawee  of  a  bill  of 
exchange  is  entitled  to  twenty-four  hours 
after  presentment  in  which  to  decide  whether 
he  will  accept,  and  is  entitled  to  have  the  bill 
left  with  him  for  that  period ;  but  in  the  ab- 
sence of  agreement,  drawee  is  not  entitled  to 
documents  of  title  att^ached  to  the  draft,  prior 
to  acceptiince,  and  a  collecting  agent,  unless 
expressly  instructed,  should  withhold  the  at- 
tached documents  upon  leaving  the  draft  with 
the  drawee  for  acceptance.  Vol.  9,  p.  819, 
April,  1917. 


46.  (Tex.)  The  rule  allowing  a  drawee 
twenty-four  hours  to  determine  whether  or 
not  he  will  accept  does  not  apply  to  checks 
or  drafts  payable  on  demand,  but  only  to 
drafts  legally  presentable  to  the  <lrawee  for 
accejjtance.  Checks  and  demand  drafts  there- 
fore should  be  immediately  protested  if  pay- 
ment is  refused.  In  Texas  a  sight  draft 
carries  grace  and  is  presentable  for  accept- 
ance.    Vol.  4,  p.  557,  March,  1912. 

Note:  The  Negotiable  Instrumenta  Law,  which 
abolislies  grace,  was  enacted  in  Texas  in  March, 
1!)19,  and  thereunder,  an  instrument  drawn  pay- 
able nt  sight  is  payable  on  demand. 

Certification  of  raised  check 

47.  (N.  Y.)  In  a  decision  in  New  York 
it  was  held  that  a  bank  certifying  a  check 
which  had  been  raised,  was  entitled  to 
recover  the  amount  from  a  bank  which  had 
cashed  the  certified  check  for  a  forger  and 
received  payment  from  the  certifying  bank. 
The  court  held  the  latter  bank  was  entitled  to 
recover  under  the  general  rule  that  money 
paid  under  mistake  of  fact  is  recoverable; 
that  certification  does  no  more  than  afl&rm 
the  genuineness  of  the  signature  of  the  drawer 
and  that  he  has  funds  to  meet  it,  but  does  not 
warrant  the  genuineness  of  the  body  of  the 
check;  and  that  the  certifying  bank  was  not 
guilty  of  negligence  in  not  having  detected 
the  alteration,  by  w^hich  it  was  claimed  the 
bank  advancing  value  on  the  check  was  mis- 
led. A  New  York  banker  has  questioned  the 
soundness  of  this  decision.  Opinion:  It  seems 
unjust  that  an  innocent  purchaser  of  a  check 
certified  for  one  thousand  dollars  should  have 
to  repay  nine  hundred  dollars  thereof  where 
the  check  was  originally  for  one  hundred 
dollars,  but  it  w'ould  be  equally,  if  not  more 
unjust,  if  the  certifying  bank  had  to  suffer. 
The  bank  has  no  means  of  knowledge  in  its 
possession  to  detect  the  alteration,  and  to  hold 
it  liable  on  every  certified  raised  check  would 
impose  a  serious  burden.  Vol.  8,  p.  1013,  Mav, 
1916. 

Revocation    of   mistaken   certification    of 
stopped  check 

48.  (Conn.)  On  Jan.  2,  1919,  payment 
was  stopped  on  a  certain  check  of  a  depositor 
of  a  bank.  Several  weeks  later  it  was  pre- 
sented by  an  agent  of  a  reputable  manufac- 
turing company  who  requested  that  it  be  cer- 
tified. The  agent  stated  that  he  was  not 
going  to  negotiate  the  check  until  after  a 
settlement  of  a  dispute  regarding  certain 
goods.  The  bank  through  a  mistake  certified 
the  check  and  upon  discovery  of  the  error 
the  next  day,  wired  the  company  not  to  use 


6 


ACCEPTANCE  AND  CERTIFICATION 


[57 


the  check.  The  company  failed  to  reply  and 
the  bank  now  seeks  redress.  Opinion:  Where 
a  hank  througli  mistake  certifies  a  check  upon 
which  payment  has  previously  been  stopped 
and  the  check  remains  in  the  hands  oi  the 
payee  at  the  time  he  receives  notice  of  revo- 
cation of  the  certification  and  no  change  of 
circumstances  nor  harm  nor  injury  to  the 
payee  has  resulted,  the  bank  is  not  lial)le  to 
the  payee  upon  its  certification.  If  the 
payee  thereafter  wrongfully  negotiates  the 
che&k  so  as  to  make  the  bank  liable  there- 
on to  an  innocent  purchaser  for  value,  the 
bank  would  have  recourse  upon  the  payee  for 
money  received  to  his  use.  Vol.  11,  p.  605, 
May,  1919. 

Stamp    including    amount    certified    not 
advantageous 

49.  (Pa.)  The  certification  stamp  used 
by  a  bank  is  as  follows : 

"Good  when  properly  indorsed 

$1,500  and  00  cents 

Jan.  14,  1918 

Do  not  destroy  this  check 

Teller" 

The  wisdom  of  including  the  amount  in  the 
stamp  is  questioned.  Opinion:  Certification 
of  check  without  re-stating  the  amount  in  the 
certification  is.  of  course,  valid  and  in  the 
past  has  been  the  common  practice.  A  bank 
is  not  bound  to  know  more  than  its  drawer's 
signature  and  the  sufficiency  of  his  funds;  it 
is  not  bound  to  know  correctness  of  the 
amount  of  a  check  and,  in  a  case  where  it  cer- 
tifies a  check  raised  from  $15  to  $1,500,  it 
would  probably  be  an  unwise  practice  to  in- 
clude such  amount  in  its  certification  stamp 
for  it  might  ])C  estopped  from  questioning  the 
amount  as  against  a  holder  in  due  course, 
whereas  upon  an  ordinary  certification  it 
would  not  be  liable  for  the  raised  amount. 
A'ol.  10,  p.  59,1.  Feb.,  1918. 

Stopping  payment  of  certified  checks 

50.  (Ala.)  Drawee  bank  promising  by 
wire  to  pay  customer's  check  is  liable  to  holder 
and  drawer  cannot  thereafter  stop  payment, 
but  similar  promise  over  telephone  is  not 
I)in(ling,  because  acceptance  must  be  in  wri- 
ting and  drawer's  riglit  to  stop  payment  con- 
tinues. Vol.  7,  p.  304,  Nov.,  1914.  See  55, 
1237  et  seg. 

Certification  by  telegraph 
See  30,  31 

51.  (Kan.)  The  drawee  of  a  bill  tele- 
phones to  a  telegraph  agent  to  wire  accept- 


ance. Opinion:  The  acceptance  is  valid  and 
binding  as  being  an  acceptance  in  writing  by 
the  drawee  by  the  hand  of  his  agent.  Vol.  7, 
p.  491,  Jan.,  1915. 

52.  (Okla.)  A  bank  cashing  a  check 
upon  another  bank  on  faith  of  a  telegram  by 
the  drawee  that  it  will  pay  tiie  clieck  can  hold 
the  latter  as  an  acceptor.  Vol.  1,  j).  140, 
Oct.,  1908. 

53.  (Okla.)  In  reply  to  a  request  to  pay 
a  certain  check,  the  drawee  bank  telegraphed 
"Signature  being  genuine,  will  pay  John 
Smith's  check  for  two  hundred  dollars." 
Opinion:  The  drawee  bank  would  be  liable 
as  an  acceptor  under  the  Negotiable  Instru- 
ments Law  to  one,  who  on  faith  of  the  tele- 
graphic promise,  purchased  the  check  for 
value.     Vol.  3,  p.  338,  Dec,  1910. 

54.  (Tex.)  After  the  drawee  bank  has 
wired  the  holder  that  it  will  pay  a  specified 
check,  it  is  too  late  for  the  drawer  to  stop 
payment.  The  telegraphic  promise  by  the 
drawee  to  pay  binds  it  as  an  acceptor  of  the 
check.  But  where  the  drawee  promises  to 
pay  the  check  over  the  telephone,  it  is  not 
bound,  the  acceptance  not  being  in  writing, 
except  in  Texas  where  an  oral  promise  to  pav 
will  bind  the  bank.  Vol.  9,  p.  903,  Mav, 
1917. 

Note:  The  Negotiable  Instruments  Law  requir- 
ing acceptances  to  be  in  writing  was  passed  in 
Texas  in  March,  l'J19. 

55.  (Tex.)  A  bank  received  a  wire, 
"Will  you  pay  John  Doe's  chock  for  one  hun- 
dred dollars?*'  and  replied  by  wire  "Yes,  we 
will  pay  John  Doe's  check  for  one  hundred 
dollars."  Payment  of  the  check  was  stopped. 
Opinion:  The  drawee  bank  was  bound  to  pay 
the  amount  of  the  check  to  one  who  purehased 
it  on  faith  of  the  telegra])hic  promise.  The 
bank  accejiting  the  check  by  wire  luid  tlie 
right  t(j  cliarge  the  amount  to  the  drawer's 
account  the  same  as  in  the  case  of  a  check, 
certified  over  tiie  counter,  and  the  drawer 
cannot  thoreaft^'r  stop  pavmont.  Vol.  5, 
p.  175,  Sept.,  191 '3. 

Certification  by  telephone 
Si'e   2,   T),   0,   7.    10,   2.S 

56.  (Ala.)  A  bank  answered  an  in- 
quiry over  the  telephone  that  certain  specified 
checks  drawn  on  it  were  good,  but  before  pre- 
sentment the  drawer  stopped  payment.  Opin- 
ion: The  bank  was  not  liable  to  the  holder  of 
the  checks.     Vol.  5,  p.  374,  Dec,  1912. 

57.  (Conn.)  The  drawee  of  a  check  an- 
swering the  holder's  inquiry  concerning  John 


58 


i)I(;KST  OF  I.KCAL  oriNiox.s 


Doc's  dicck  for  $170  replied  over  the  tele- 
phone "Ves,  John  Doe  is  <,'oo(l  for  $170."  Be- 
fore the  check  is  presented,  the  maker  stops 
})ayinent.  Oiiinion:  The  certification  over 
tiic  tcleplionc  is  not  valid  under  tlie  Negoti- 
ahle  Instruments  Law  which  requires  an  ac- 
ceptance to  be  in  writing.  Vol.  3,  p.  277, 
Nov.,  1!)10. 

58.  (Mo.)  A  ])ank  certified  its  custom- 
er's check  over  the  telephone  and  subsequent- 
ly the  account  was  att^ached  by  a  creditor  of 
the  customer,  who  claimed  that  the  certifica- 
tion was  invalid.  Opinion:  The  certification 
not  being  in  writing,  was  not  legal  and  bind- 
ing under  the  Negotiable  Instruments  Law. 
Vol.  3,  p.  102,  Jan.,  191L 

59.  (N.  J.)  A  promise  over  the  tele- 
phone to  pay  a  check  is  not  binding  as  an  ac- 
ceptance, not  being  in  writing.  Notwith- 
standing a  verbal  promise  over  the  telephone 
to  pay,  the  bank  is  bound  to  pay  another 
check,  first  presented,  which  would  reduce  the 
balance  below  the  amount  necessary  to  pay 
the  first  stated  check.  Vol.  3,  p.  587,  April, 
1911. 

60.  (Okla.)  A  bank  has  been  in  the 
habit  of  accepting  checks  of  its  customers 
over  the  telephone.  It  immediately  charges 
the  customer's  account  with  the  item  and 
credits  the  "certified  checks''  account,  treating 
it  as  though  it  had  been  certified  over  the 
counter.  Opinion:  A  promise  to  pay  a  check 
over  the  tcleplione  not  being  in  writing  is 
not  valid  nor  binding  as  an  acceptance.  Vol. 
4,  p.  375,  Dec,  1911. 

61.  (Ohio.)  The  certification  of  a  check 
by  telephone  is  not  valid  under  the  Negoti- 
able Instruments  Law  of  Ohio,  because  not 
in  writing.     Vol.  2,  p.  231,  Dec,  1909. 

62.  (Pa.)  A  drawee  bank  receiving  an 
incjuiry  over  the  telephone  whether  the  check 
of  Mr.  A is  good  and  will  be  paid  re- 
plies in  the  affirmative,  and  afterwards  re- 
fuses to  pay  the  check  because  payment  has 
been  stopped.  Opinion:  Oral  promise  over 
telephone  or  otherwise  by  a  drawee  of  check 
to  pay  same  not  binding  because  acceptance 
must  be  in  writing — Nor  can  bank  in  absence 
of  fraud  be  held  liable  to  holder  wdio  has 
cashed  check  on  faith  of  promise  on  equitable 
principle  of  estoppel,  as  this  principle  inap- 
plicable in  face  of  positive  statutor}^  require- 
ment of  written  acceptance.     (The  courts  of 


I'cnnsylvania    would    probablv    follow    this 
rule.)     Vol.  n,  p.  023,  Marcii,  1914. 

63.  (Tenn.)  A  gave  B  his  check.  B 
took  it  to  a  hank  in  another  town  which  asked 
the  drawee  over  the  telephone  '"Is  clieck  of  A 
good?"  The  drawee  replied  that  check  was 
good  if  signature  was  genuine.  Before  pre- 
sentment A  stopped  payment.  The  purchasing 
bank  threatens  suit  unless  check  and  protest 
fees  are  paid.  Opinion:  An  oral  promise 
over  the  telephone  by  the  drawee  to  pay 
a  check  is  not  binding  under  the  Negotiable 
Instruments  Law  because  the  acceptance  must 
be  in  writing.     Vol.  7,  p.  583,  Feb.,  1915. 

64.  (Tex.)  A  gave  B  his  check  for  $500 
u])on  wliich  was  indorsed  by  B  the  condition 
that  the  check  was  given  "when  contract  to 
be  drawn  is  satisfactory  to  both  parties." 
B  cashed  the  check  at  his  bank,  but  only  after 
the  bank  received  the  oral  promise  of  the 
drawee  over  the  telephone.  Failing  to  agree 
upon  a  satisfactory  contract,  A  stopped  pay- 
ment on  the  check.  The  facts  show  that  B's 
bank  did  not  give  the  drawee  the  information 
on  back  of  the  check.  Is  the  drawee  bound 
by  its  oral  promise?  Opinion:  In  Texas  an 
oral  promise  to  pay  a  check  will  bind  the  bank 
but  the  check  must  conform  to  the  terms  of 
the  promise,  and  where  a  bank  promises  to 
pay  a  check  for  $500  and  the  check  as  pre- 
sented is  coupled  with  a  condition  making  it 
payable  only  if  a  future  drawn  contract  is 
satisfactory,  the  check  does  not  conform  to 
the  promise  and  the  bank  is  not  bound.  Vol. 
10,  p.  42,  July,  1917. 

Note:  Under  the  Negotiable  Instruments  Law 
passed  in  Texas,  in  March,  1019,  an  acceptance 
must  be  written. 

65.  (W.  Va.)  A  bought  an  ice  plant 
from  B  for  $900,  but  discovered  that  certain 
parts  of  the  machinery  amounting  in  value  to 
$80  were  missing.  A  delivered  to  B  two 
checks  in  pavmcnt.  one  for  $820  and  another 
for  $80.  In  the  $80  check,  he  stated  that 
the  sum  was  for  the  parts  of  the  machinery 
he  did  not  get.  The  bank  at  the  request  of 
B  promised  over  the  telephone  to  pay  the 
checks.  Before  presentment  A  notified  the 
bank  not  to  pay  the  $80  check.  Opinion: 
The  bank  is  not  legally  bound  to  pay  the 
check  because  a  telephone  promise  is  not  bind- 
ing as  an  acceptance,  and  where  payment  is 
subsequentlv  stopped  the  bank  should  not  pav. 
A^ol.  l,p.  267,  Jan.,  1909. 


[74 


ACCOMMODATION  INDORSERS 


Accommodation    and    commercial    paper 
distinguished 

66.  (Va.)  A  firm  sold  a  certain  amount 
of  its  furniture  to  P  for  the  purpose  of  join- 
ing with  him  in  the  formation  of  a  new  part- 
nership, and  for  which  they  received  P's 
notes  secured  by  a  deed  of  trust  on  real  estate. 
The  firm  indorsed  the  notes  and  discounted 
them  with  a  bank.  The  bank  examiner 
claimed  that  the  firm  signed  as  accommoda- 
tion indorsers,  and  that  the  notes  were  accom- 
modation paper  and  were  subject  to  the  stat- 
utory restrictions  on  money  borrowed  by  a 
single  firm.  Opinion:  The  notes  should  be 
considered  commercial  or  business  paper, 
within  the  meaning  of  the  Virginia  statute 
excepting  such  paper  from  restrictions  on 
money  borrowed,  and  not  speculative  or  ac- 
commodation paper.  Vol.  4,  p.  429,  Jan., 
1912. 

Indorsement  after  delivery 

See    985 

67.  (Ala.)  An  accommodation  indorser 
signing  a  note  after  delivery,  and  after  the 
consideration  has  passed  between  the  parties, 
is  not  liable,  unless  there  is  a  new  considera- 
tion. But  no  new  consideration  is  required 
where  the  note  is  indorsed  pursuant  to  an 
agreement  made  prior  to  delivery.  Vol.  7, 
p.  36,  July,  1914. 

68.  (Kan.)  A  bank  makes  a  loan  to  A 
for  $500  upon  his  note,  witli  the  understand- 
ing and  agreement  that  B  would  sign  later  as 
accommodation  indorser.  B  afterwards  comes 
to  the  bank  and  signs  the  note.  Opinion: 
One  who  signs  a  note  as  accommodation  in- 
dorser after  its  delivery  and  the  passing  of 
consideration  is  not  liable,  without  a  new 
consideration,  unless  such  indorsement  is 
made  pursuant  to  an  agreement  in  advance 
of  delivery.  In  this  case  B  is  liable  if  iiis 
subsequent  indorsement  was  in  pursuance  of 
the  prior  agreement.  Vol.  9,  p.  48,  July, 
1916. 

69.  (N,  Y.)  A  bank  discounted  a  tliree 
montlis'  note  of  a  corporation,  indorsed  indi- 
vidually by  two  oflicers  of  the  corporation. 
After  the  expiration  of  one  month,  the  bank, 
wishing  further  protection,  re(iuosted  tlie  sig- 
nature of  an  additional  indorser.  Opinion: 
The  additional  indorser  by  indorsing  for  ac- 
commodation could  not  be  held  liable,  as  there 
would  be  no  consideration  to  support  his  in- 
dorsement.    Vol.  5,  p.  751,  May,  191:5  . 


Liability  of  accommodation  indorser 

70.  (Iowa.)  Where  tiie  payee  presents 
a  check,  which  has  been  raised  by  him,  direct- 
ly to  the  drawee,  and  the  drawee  pays  the 
same  on  the  strength  of  an  accommodation 
indorsement,  the  liability  of  the  accommoda- 
tion indorser  to  the  drawee  is  somewhat 
doubtful  under  present  law,  although  in  a  re- 
cent New  York  case  the  accommodation  in- 
dorser was  held  liable  to  the  drawee.  In 
case  such  check  is  cashetl  liy  another  bank  for 
the  payee,  the  acconunodation  indorser  would 
be  liable  to  the  purchasing  bank  and  the  latter 
to  the  drawee.     Vol.  7,  p.  SG,  July,  1914. 

71.  (N.  Y.)  Under  the  Negotiable  In- 
struments Act  an  accommodation  indorser  is 
liable  on  a  note  to  a  holder  in  due  course,  not- 
withstanding such  holder  at  the  time  of  tak- 
ing the  instrument  knew  him  to  be  only  an 
accommodation  partv.  Vol.  3,  p.  519,  March, 
1911. 

72.  (Tenn.)  A  l)ank  cashed  a  check  for 
the  indorser  by  telephone  request  of  the 
drawee.  Presentment  was  duly  made  and  be- 
fore payment  the  drawee  failed.  Indorser 
claimed  freedom  from  liability  because  check 
was  cashed  for  the  benefit  of  the  drawee  and 
not  for  his  l)enefit.  Opinion:  Indorser  was 
liable  on  his  indorsement  irrespective  of 
whether  he  was  accommodated.  Vol.  7,  ]). 
106,  Aug.,  1914. 

Liability  as  between  themselves 

73.  (N.  Y.)  B  and  C  indorse  a  note  in 
the  order  named  for  the  accommodation  of  A, 
and  C  is  compelled  to  pay  the  note.  C  seeks 
to  hold  B  liable  for  the  full  amount  of  the 
note.  Opinion:  C  can  hold  B  liable  for  the 
full  amount  unless  there  has  been  some  speci- 
fic agreement  between  the  accommodation  in- 
dorsers  that  they  shall  only  be  ratably  liable. 
The  NegotiaI)le  Instruments  Act  of  New 
York  provides  ''As  respects  one  another,  in- 
dorscrs  are  liable  prima  facio  in  the  order  in 
which  they  indorse,  but  evidence  is  admissible 
to  show  that  as  between  or  among  themselves 
tliev  have  agreed  otherwise."  Vol.  10,  p.  851, 
June,  19is'. 

74.  (Pa.)  A  note  of  a  corporation  hav- 
ing three  imlorsers  was  protested  for  non- 
j)ayment  in  1909,  and  since  that  time  inter- 
est thereon  has  been  paid  by  the  corporation 
but  nothing  has  been  paid  thereon  by  the  in- 
dorsers  except  that  one  of  the  indorsers  made 
partial  ]iayments  in  reduction  of  the  prin- 
cipal, the  last  of  which  was  in  January,  1913. 


9 


75 


DIGEST  OF  LEGAL  OPINIONS 


What  are  tlic  liabilities  of  the  parties?  Opin- 
ion: The  ri^lit  of  action  of  the  holder  of  the 
note  accrued  against  all  parties  when  the  note 
was  protested  in  January,  1D09,  and  due  no- 
tice was  given  the  indorsers.  The  note  is 
barred  by  the  Statute  of  Limitations  (six 
years  in  Pennsylvania)  as  to  all  indorsers  and 
the  sole  remaining  liability  is  that  of  the  cor- 
poration maker.  Interest  paid  by  the  cor- 
poration maker  and  not  by  the  indorsers  op- 
erates to  suspend  the  running  of  the  statute 
as  to  it,  but  partial  payment  made  by  one  of 
several  joint  debtors  without  the  acquies- 
cence, consent  or  ratification  of  the  other 
joint  debtors  will  not  operate  to  suspend  'the 
running  of  the  statute  as  to  him.  Any  ac- 
tion for  contribution  which  the  indorser  who 
made  partial  payment  may  have  had  against 
the  company  indorsers  has  likewise  been 
barred  by  the  statute.  Vol.  11,  p.  491, 
March,  1IU9. 

75.  (Va.)  A  made  a  negotiable  note 
payable  to  the  order  of  B,  bearing  three  in- 
dorsements of  B,  C  and  D  in  the  order 
named,  who  indorsed  for  accommodation.  D 
paid  the  note  and  demanded  full  payment 
from  the  previous  indorsers;  B  and  C  will 
only  contribute  one-third.  Opinion:  The  ac- 
commodation indorsers  are  liable  for  the  full 
amount  in  the  order  in  which  they  indorse 
unless  as  between  or  among  themselves  they 
have  acrreed  otherwise.  Vol.  2,  p.  190,  Nov., 
1909.  ^ 


Liability  on  corporation  note 

76.  (Mich.)  A  corporation  discounted 
its  note  payable  at  a  bank.  The  note  was  in- 
dorsed for  accommodation  by  several  of  the 
directors  of  the  company  and  signed  "X  Com- 
pany, by  C.  II.  Jones."  The  company  failed 
before  maturity.  Opinion:  The  accommoda- 
tion indorsers  were  liable  on  the  note  pro- 
vided demand  and  due  notice  of  dishonor 
were  given  them.  The  fact  that  the  indors- 
ers were  directors  of  the  bankrupt  company 
does  not  dispense  with  these  steps.  The  pos- 
session by  the  bank  of  the  note  at  maturity 
constituted  sufficient  demand.  C.  H.  Jones's 
signature  imports  a  corporate,  not  a  personal 
obligation.  Vol.  3,  p.  520,  March,  1911. 
See  1023,  1024. 

77.  (Pa.)  A  corporation  in  the  hands 
of  a  receiver  issued  its  promissory  note,  in- 
dorsed for  accommodation  by  several  respon- 
sible persons.  The  note  was  issued  pursuant 
to  a  court  order,  but  the  legality  of  said  order 
was  questioned  by  the  bank  about  to  purchase 
the  same.  Opinion:  The  bank  should  not 
purchase  the  note  until  it  has  ascertained 
whether  the  note  is  void  or  illegal.  Accom- 
modation indorsers  are  liable  on  a  corpora- 
tion note,  although  the  corporation  because  of 
incapacity  is  not  liable,  but  if  the  note  is  void 
for  illegality,  this  defense  is  open  to  the  ac- 
commodation indorsers.  Vol.  5,  p.  166, 
Sept.,  1912. 


ADVERTISEMENT 

For  Advertising  for  "Savings"  Accounts,  see  188,  870 


Advertising  of  capital 

78.  (Ark.)  A  bank  with  capital  of  $50,- 
000  has  $30,675  actually  paid  in,  and  wishes 
to  advertise  that  its  capital  is  $50,000.  Opin- 
ion: No  statute  in  Arkansas  expressly  pro- 
hibits the  bank  from  so  advertising,  although 
a  certain  statute  providing  that  a  false  report 
with  intent  to  deceive  as  to  the  condition  of 
a  bank  is  a  criminal  offense,  may  have  appli- 
cation.    Vol.  4,  p.  309,  Nov.,  1911. 

Advertisement  with  United  States  Flag 

79.  (Mass.)  Until  the  Massachusetts 
Act  of  1913  prohibiting  the  misuse  of  the 
United  States  flag  is  judicially  construed,  it 
would  be  unsafe  for  banks  in  that  state  to  im- 
print such  flag  upon  their  statement  folders. 
Vol.  7,  p.  169,  Sept.,  1914. 

80.  (Mo.)  The  placing  of  a  representa- 
tion of  the  flag  upon  a  draft  or  certificate  of 


deposit,  disconnected  from  any  advertisement, 
would  not  violate  the  Missouri  statute  against 
using  the  flag  for  advertising  purposes.  Vol. 
9,  p."982,  June,  1917. 

81.  (N.  Y.)  A  bank's  statement  folder 
showing  its  condition  and  used  for  advertis- 
ing purposes  contains  an  imprint  of  the  like- 
ness of  the  United  States  flag.  Opinion: 
There  is  no  Federal  statute  prohibiting  such 
imprint;  the  extent  of  Federal  legislation  on 
the  subject  is  to  prohibit  the  use  of  the  flag  as 
a  trade  mark.  While  the  New  York  statute 
in  regard  to  the  desecration  and  improper 
use  of  the  United  States  and  New  York  State 
flags  expressly  provides  that  it  shall  not  apply 
to  a  newspaper,  pamphlet  or  circular  on  which 
the  flag  is  printed  or  painted  disconnected 
from  any  advertisement,  it  would  be  safer  to 
consult  the  District  Attorney  of  the  Coimty 
before  imprinting  the  flag  on  the  bank's 
statement  folder.     Vol.  6,  p.  817,  June,  1914. 


10 


[91 


ALTERED  AND  RAISED  PAPER 

See  Forgery,  512-G2U 


Blank  form  of  another  bank  used 

See  97 

82.  (Mass.)  In  Kansas  it  has  been  held 
not  negligent  for  a  bank  to  pay  a  check  where- 
in the  name  of  the  drawee  has  been  changed 
in  a  handwriting  other  than  the  drawer's ;  but 
the  safer  practice  is  to  refuse  payment  of  such 
a  check  until  the  bank  receives  satisfactory 
evidence  that  the  alteration  has  been  author- 
ized.    Vol.  6,  p.  32,  July,  1913. 

83.  (N.  J.)  A  check  was  drawn  payable 
to  John  Doe  only,  upon  the  blank  form  of 
another  bank,  whose  name  was  erased  and  the 
drawee  bank's  name  substituted.  Opinion: 
A  check  to  the  payee  only  is  not  negotiable. 
The  fact  that  the  check  was  drawn  on  the 
blank  form  of  another  bank  did  not  render 
the  instrument  invalid,  but  places  an  addi- 
tional burden  on  the  drawee  bank  to  safe- 
guard itself  against  fraud.  Vol.  4,  p.  221, 
Oct.,  1911. 

84.  (N.  J.)  It  is  legal  but  somewhat  un- 
safe for  a  bank  to  pay  a  check  drawn  on  the 
check  form  of  another  bank,  with  name  sub- 
stituted as  drawee.  Vol.  5,  p.  176,  Sept., 
1912. 

Check  raised  after  certification 

85.  (Cal.)  Where  a  check  is  certified 
and  afterwards  raised  and  paid  by  the  certi- 
fying bank  at  the  raised  amount,  the  bank 
has  a  right  of  recovery  under  the  rule  that 
money  paid  under  mistake  of  fact  is  recover- 
able, provided  the  position  of  the  holder,  by 
reason  of  receiving  such  payment,  will  not  be 
changed  for  the  worse  as  a  result  of  such 
mistake.     Vol.  7,  p.  96,  Aug.,  1914. 

"Collection"    rubber    stamped    on 
instrument 

86.  (Ore.)  It  is  a  general  custom  of 
bankers  to  place  a  collection  stamp  on  notes 
and  the  inquiring  bank  uses  a  rnl)her  stamp 
with  name  of  bank  and  the  word  "collection," 
followed  with  blank  space  for  their  collection 
number,  placing  same  on  face  of  the  note  in 
the  margin,  or  any  other  blank  space  thereon. 
A  local  attorney  cautions  the  bank  not  to 
place  the  collection  stamp  on  any  part  of  the 
notes  received  for  collection,  stating  tliat  in 
suit  on  the  note,  it  might  be  used  by  the 
maker  as  a  defense  in  refusing  payment. 
Opinion:  The  word  "collection"  rubber 
stamped  on  the  face  of  an  instrument,  as  de- 


scribed, does  not  constitute  a  material  altera- 
tion and  does  not  affect  the  validity  thereof. 
Vol.  8,  p.  252,  Sept.,  1915. 

Erasure  by  acid 

87.  (Mass.)  Where  a  bank  paid  its  cus- 
tomer's check,  the  amount  of  which  was  raised 
after  erasure  by  acid,  it  is  responsible  to  the 
customer,  the  customer  not  being  bound  to 
safeguard  his  check  against  every  possible  al- 
teration.    Vol.  1,  p.  31,  July,  1908. 

88.  (Pa.)  A  check  was  dra\\'n  on  a  Bos- 
ton bank,  from  which  the  name  of  the  payee 
and  the  amount  were  washed  by  acid,  and  a 
different  payee  and  an  increased  amount  in- 
serted. After  indorsement  by  the  purj)orted 
payee,  the  check  was  cashed  by  a  customer  of 
a  Philadelphia  bank,  but  only  after  he  had 
deposited  the  same  for  collection  and  had  re- 
ceived advice  that  it  had  l)een  paid.  Opin- 
ion: Irrespective  of  the  Philadelphia  bank's 
guaranty  of  indorsement- there  is  a  clear  right 
of  recovery  by  the  Boston  bank  either  against 
the  former  bank  as  apparent  owner  of  the 
check,  or  if  the  check  was  indorsed  "for  col- 
lection," against  the  customer.  Vol.  1,  p.  33, 
July,  1908. 

Liability  for  payment 

See   204,   200 

89.  (Me.)  Where  a  bank  paid  a  raised 
check,  and  there  were  no  exceptional  circum- 
stances of  negligence  on  the  drawer's  part,  it 
cannot  charge  the  raised  amount  to  the  cus- 
tomer's account.  In  the  absence  of  gross  or 
inexcusable  neglect,  a  bank  oflicer  or  minor 
official  is  not  personally  liable  for  a  mistake 
in  paving  such  check.     Vol.  1,  p.  333,  March, 

90.  (Mass.)  A  drawee  bank  paid  a 
cheek  upon  which  the  drawer's  signature  was 
genuine,  but  the  body  of  the  check  was  forged 
in  a  dilTerent  handwriting,  there  being  no 
sign  of  an  alteration.  Opinion:  If  the  check 
was  signed  in  blank,  stolen  and  filled  out  or 
was  originally  unfilled  or  partly  unfilled  and 
afterwards  altered  by  filling  the  blanks,  the 
payment  by  the  drawee  would  be  chargeable 
to  the  customer;  but  if  the  check  was  issued 
in  ordinary  and  complete  form  and  after- 
wards altered  without  authority,  the  p.ay- 
ment  would  not  be  chargeable.  Vol.  7,  p. 
385,  Dec,  1914. 

91.  (Mo.)  A  bank  which  takes  from  the 
payee  a  check  raised  from  $2  to  $200,  and  ra- 


il 


92 


DlCiKST  OF  J.K(JAL  Oi'JMuXS 


(civcs  the  full  amount  thoroon  from  dnothcr 
liaiik,  is  iTspoiisihU;  to  tlic  latter  for  the 
ainouiit,  such  hitter  hank  l)eiii^'  resi)()iisil)h; 
to  the  drawee  froiii  whom  it  lias  collei'ted  the 
full  amount.     Vol.  2,  p.  11'.),  April,  lUlO. 

92.  (N.  Y.)  A  cheek  for  $5  was  rai.scd 
to  ^'^:){)  and  the  name  of  payee  erased  and 
hearer  inserted.  It  was  paid  hy  a  teller  in 
violation  of  his  instructions  not  to  pay  a  hear- 
er clieck  in  excess  of  $100.  Opinion:  The 
hank  is  responsihle  to  its  customer  and  the 
teller  is  liahle  to  the  hank.  Vol.  1,  p.  205, 
Dec,  1!I08. 

93.  (S.  Dak.)  A  gave  B  a  clieck  supposed 
to  he  for  the  sum  of  ninetv-nine  cents,  hut 
which  was  cashed  by  B  for  ■$'jy.!)9.  B  made 
out  the  check,  which  A  signed  but  without 
noticing  just  how  it  was  filled  out.  Opinion: 
If  the  check  was  originally  drawn  for  $99.99, 
A  is  liable.  If  the  amount  was  subsequently 
raised  the  rule  applies  that  the  drawer  is  not 
bound  so  to  prepare  a  check  that  nobody  can 
successfully  t-amper  with  it,  but  if  he  careless- 
ly executes  the  check  so  as  to  facilitate  or  in- 
vite raising  of  the  amount  without  giving  the 
check  a  suspicious  appearance,  the  bank  may 
charge  the  full  amount  paid  to  the  drawer's 
account.  Vol.  8,  p.  803,  March,  1916.  See 
341  et  seq. 

94.  (Tex.)     Where  a  draft  to  bearer  is 

d^a^vn   for  " twelve   dollars,"   the 

word  ''twelve''  being  written  at  the  right  of 
the  line  a  space  also  being  left  between  the 
dollar  mark  and  the  figures  "12,"  and  is  in- 
dorsed in  that  condition  and  afterwards 
fraudulently  raised  to  "five  hundred  and 
twelve  dollars"  in  words  and  figures,  and  ne- 
gotiated to  a  bank  by  the  drawer  on  faith  of 
the  indorsement,  the  authorities  conflict  as  to 
the  right  of  recourse  of  the  bank  upon  the  in- 
dorser  for  the  full  amount.  The  generally 
accepted  rule  of  the  law  merchant  is  that 
where  blanks  negligently  left  are  filled,  the 
party  who  has  invited  the  fraud  by  leaving 
the  blanks  should  stand  the  loss,  rather  than 
a  holder  for  value.     Vol.  1,  p.  265,  Jan.,  1909. 

Material  alteration 

See  132!) 

95.  (Kan.)  A  bank  held  A's  note  of 
$1,300  for  several  years,  which  indebtedness 
was  renewed  from  time  to  time.  B,  a  third 
person,  came  into  the  bank  and  indorsed  the 
note  as  surety,  at  the  same  time  paying  $350 
on  the  principal.  B  never  received  any  con- 
sideration for  his  indorsement  which  was 
made  without  the  knowledge  or  consent  of  the 


maker.  The  maker  disclaims  liability  on  the 
note  ix'cause  of  material  altcjration.  Opin- 
ion: The  fact  that  nfU'.r  a  note  is  delivered, 
another  person  without  the  knowledge  or  con- 
sent of  the  maker  adds  his  name  as  surety, 
does  not  release  the  maker  from  liability  on 
the  ground  of  material  alteration.  \'ol.  11, 
p.  OTl,  June,  1919. 

96.  (Mass.)  Where  the  amount  of  a 
note  is  written  in  the  body  and  also  given  in 
figures  in  the  margin,  the  deduction  from 
such  marginal  figures  of  the  amount  of  a  par- 
tial pavment  is  not  a  material  alteration  of 
the  note.     Vol.  9,  p.  417,  Nov.,  1916. 

Place  of  payment  altered 

See   1328 

97.  (Miss.)  A  was  the  holder  of  a  check 
drawn  by  B  on  a  bank  which  returned  it  to  A 
indorsed  "not  sufficient  funds."  Thereupon 
A  changed  the  name  of  the  drawee  to  the 
bank  of  C,  where  B  also  had  an  account,  and 
obtained  the  money.  Later  a  subsequent 
good  check,  dra^vn  by  B  on  the  bank  of  C 
was  presented,  and  dishonored  because  of  a 
shortage  created  by  payment  of  the  altered 
check.  Opinion:  As  to  the  altered  check,  the 
alteration  constituted  forgery  and  rendered 
A  criminally  liable,  and  as  between  B  and 
bank  of  C,  the  bank  must  bear  the  loss.  The 
alteration  by  A  would  also  avoid  any  possible 
liability  on  the  part  of  B  to  A.  As  to  the 
good  check,  the  bank  is  answerable  in  dam- 
ages should  B  prove  injury  to  his  credit  aris- 
ing out  of  the  bank's  failure  to  honor  his 
check  in  the  hands  of  a  third  partv.  Vol.  3, 
p.  82,  Aug.,  1910.     See  82,  83,  84,'  1328. 

98.  (N.  Y.)  A  note  was  altered  by  draw- 
ing lines  through  the  place  of  payment.  Opin- 
ion: The  note  was  materially  altered  and 
avoided,  except  that  a  holder  in  due  course 
may  enforce  it  according  to  its  original  tenor. 
In  this  case  the  purchaser  could  not  be  a 
holder  in  due  course,  when  a  mere  inspection 
of  the  note  shows  the  alteration.  Vol.  8, 
p.  1102,  June,  1916. 

Raised   checks 

99.  (Md.)  A  bank  innocently  cashing  a 
raised  check  cannot  hold  the  drawer  for 
raised  amoimt  but  only  for  the  amount  for 
which  he  drew  check.  Vol.  3,  p.  677,  Mav, 
1911.     See  344. 

100.  ,  (Okla.)  A  bank  through  inadver- 
tence cashed  a  check  raised  from  $8.75  to  $80, 
notwithstanding  the  fact  that  the  check  bore 
evidence  of  alteration  on  its  face,  by  reason 
of  the  words  stamped  thereon  "not  over  ten 


12 


^' 


ALTERED  AXD  RAISED  PAPER 


108 


dollars."  Opinion:  If  bank  is  a  holder  in 
due  course,  it  can  recover  for  amount  of 
check  as  originally  drawn,  but  from  the  facts 
stated,  it  is  doutbful  that  bank  is  such  holder 
in  due  course.     Vol.  6,  p.  631,  Feb.,  191-i. 

Recovery  of  money  paid 

Recovery  by  drawee  from  accommodution  indorser 
of  raised  check.     See  70 

101.  (Ark.)  A  drawer  filled  out  a  check 
in  figures  $11.85,  leaving  the  line  for  the 
written  amount  blank.  The  payee  changed 
the  figures  to  $831.85  in  a  way  not  discern- 
ible except  under  glass  and  filled  in  the  writ- 
ten part  of  the  check  for  that  amount.  Opin- 
ion: Bank  which  pays  check  is  not  respon- 
sible because  of  drawer's  negligence.  Vol.  5, 
p.  828,  June,  1913. 

102.  (Colo.)  A  check,  made  payable  to 
two  joint  payees,  was  altered  by  one  of  the 
payees  by  erasing  the  name  of  the  other.  It 
was  then  negotiated  to  a  local  merchant  who 
deposited  it  in  his  bank  which  collected  the 
amount  from  the  drawee.  The  drawee  having 
Iteen  apprised  of  the  alteration  demands  re- 
imbursement from  the  depository  bank. 
Opinion:  The  check  was  avoided  by  the  al- 
teration ;  the  local  merchant  took  no  title  and 
the  drawee  bank  is  entitled  to  recover  the 
amount  from  the  depository  bank,  which,  in 
turn,  has  recourse  upon  the  merchant.  Vol. 
10,  p.  311,  Oct.,  1917. 

103.  (Iowa.)  A  drawee  bank  paid  two 
checks  bearing  the  genuine  signature  of  its 
customers,  but  their  amounts  of  nine  dollars 
and  six  dollars  were  raised  to  ninety  dollars 
and  sixty  dollars  respectively.  Opinion:  The 
drawee  bank  has  a  right  of  recovery  of  the 
excess  paid  upon  the  raised  checks  from  the 
owner  who  received  payment  upon  the  prin- 
ciple that  money  paid  under  a  mistake  of  fact 
is  recoverable.     Vol.  9,  p.  584,  Jan.,  1917. 

104.  (N.  H.)  A  bank  paid  its  custom- 
er's check  for  $80  to  another  customer.  Ten 
flays  later  it  was  advised  that  the  check  had 
been  raised  from  $S.  Opinion:  The  drawer 
is  not  chargeal)le  unless  he  had  left  bhuiks  in 
the  check  which  the  holder  wa.s  able  to  fill  out 
without  suspicion.  In  the  absence  of  such 
negligence  the  drawer  is  chargeable  with  $8 
and  the  sum  of  $72  representing  the  raised 
amount  is  properly  chargeal)le  against  the 
other  customer.     Vol.  8,  p.  327,  Oct.,  1915. 

105.  (N.  Y.)  A  customer  presented  for 
deposit  to  his  account  a  draft,  the  body  of 
which  was  visibly  altered.  The  bank  refused 
to  receive  the  draft,  taking  the  position  that 


the  amount  should  be  properly  authenticated 
by  the  maker  or  a  new  draft  issued.  Opinion : 
If  the  check  was  raised,  the  drawee  paying 
the  same  could  recover  the  money  paid.  The 
bank  would  not  be  safe  in  receiving  such 
draft  for  collection  and  should  send  the  draft 
back,  rather  than  forward  it  for  payment  or 
rejection  and  thus  avoid  correspondence  and 
trouble.     Vol.  6,  p.  35,  July,  1913. 

106.  (Ore.)  A  bank  paid  a  check,  raised 
from  $20.90  to  $40.90.  The  alteration  was 
apparent  on  the  face  of  the  check.  Opinion: 
The  drawee  bank  can  recover  the  money  as 
paid  without  consideration  in  the  absence  of 
special  circumstances  of  negligence  or  laches 
making  it  lial)le.  The  fact  that  the  altera- 
tion was  plainly  shown  does  not  prevent  re- 
covery, as  such  fact  is  equally  apparent  to  the 
holder.     Vol.  8,  p.  913,  April,  191G. 

107.  (Pa.)  A  drawee  who  pays  a  raised 
check  is  entitled  to  recover  the  money  paid 
from  the  person  receiving  payment,  in  the 
absence  of  negligence  in  giving  notice  after 
discovery  of  the  forgery.  Vol.  1,  p.  141, 
Oct.,  1908. 

Statement  of  consideration  altered 

XoTE:  III  a  number  of  cases  wliere  a  creditor 
takin;;'  a  check  for  a  disputed  account  containing 
a  condition  tliat  it  is  in  full  has.  without  the 
knowledge  or  authority  of  the  dcl)tor,  erased 
the  condition  and  collected  the  check  and  then 
sued  the  debtor  for  the  balance  claimed  to  be  due, 
it  has  been  held  that  his  acceptance  and  collection 
of  the  check  binds  him  to  the  condition  and  he 
can  recover  nothinjj  further.  Hussey  v.  Crass, 
.5.3  S.  W.  (Tenn.)  DSO;  Worcester  Color  Co.  v. 
Henry  Woods'  Sons  Co.  {1.5  X.  E.  (Mass.)  392; 
Hulfr.  .Johnson.  4(5  Atl.  (R.  I.)  182;  Kerr  v. 
Sanders,  2!)  S.  E.  (X.  C.)  043:  Smith  r.  Rron- 
stein.  107  X.  Y.  Sui)p.  lO^^;  Griblde  r.  Raymond 
Van  Praa-,'  Supply  Co.  10!)  X.  Y.  Supp.  242.  Ac- 
cording to  tlie  view  of  these  cases  as  the  altera- 
tion is  unauthorized,  it  does  not  affect  tlie  rights 
of  tlie  debtor  and  is  therefore  immaterial.  Xone 
of  tliese  cases,  however,  involved  tiie  rigiit  of  the 
drawer  to  refuse  to  be  cliarfjed  witli  tlie  amount 
by  the  bank  on  tlie  j,'round  tiiat  jjuynient  of  the 
altered  check  was  without  autliority.  .Should 
sucli  a  case  arise  there  is  fair  "ground  to  conclude 
tiiat  tlie  payment  would  be  held  uiiaiitliorized  and 
non-chargeable. 

108.  (Conn.)  A  clieck  in  tiie  ordinary 
form  I'ontainiMl  above  the  signature  of  drawer 
the  words  "For  account  indebtedness  Doe 
to  Roe."  These  words  were  .'scratched  out  or 
partially  erased  by  the  })ayee.  The  drawee 
refused  payment  on  the  ground  that  it  was  an 
altered  check.  Opinion:  The  bank  should 
not  pay  because  (1)  alteration  of  the  state- 
ment of  consideration  would  probably  be  held 
material  and  avoid  check,  and  (2)  bank  as 
paying  agent  of  depositor  would  not  properly 


13 


100 


DIGEST  OF  LEGAL  OPINIONS 


protect   liis    interests    in    making    payment. 
Vol.  4,  p.  (i20,  April,  1912. 

109.  (N.  J.)  A  drawee  bank  paid  its 
customer's  check  in  which  the  words  "for 
full  payment  of  account"  were  erased  by  the 
payee.  Opinion:  The  bank  should  not  have 
])aid  the  check  as  the  erasure  of  the  words  was 
a  material  alteration  and  the  check  could  not 
be  char<red  to  the  customer's  account.  Vol. 
3,  p.  588,  April,  1911.  See  Note  supra,  307 
ct  scq. 

110.  (Ohio.)  The  erasure  by  the  payee 
of  the  words  "in  full  of  all  accounts  or 
claims"  is  probably  a  material  alteration, 
which  would  avoid  the  instrument.  Bank 
should  not  pay  check  containing  such  era- 
sure. Vol.  5,  p.  827,  June,  1913.  See  Note 
supra,  307  et  seq. 

111.  (Pa.)  A  bank  should  not  pay  a 
check  which  shows  alteration  in  the  statement 
of  consideration,  and  should  obey  the  request 
of  a  customer  to  refuse  payment  of  checks 
thus  altered.     Vol.  5,  p.  107,  Aug.,  1912. 

Time  of  payment  altered 

112.  (Ind.)  Where  payee  of  note  changes 
time  of  payment  without  assent  of  maker, 
this  constitutes  a  material  alteration  and 
avoids  instrument  unless  change  is  made  to 
make  instrument  conform  to  intent  and 
agreement  of  parties.  Where  note  avoided 
by  material  alteration,  original  consideration 
generally  held  recoverable  unless  alteration 
fraudulently  made,  in  which  case  considera- 
tion is  forfeited.     Vol.  10,  p.  44,  July,  1917. 

113.  (N.  J.)     The  alteration  of  the  date 


by  the  maker  of  a  note  before  delivery  does 
not  affect  its  validity.  If  the  change  in  date 
were  made  by  the  holder  without  the  maker's 
consent,  the  note  would  be  avoided  as  to  him. 
Vol.  4,  p.  309,  Nov.,  1911. 

114.  (N.  J.)  A  check  after  indorsement 
by  the  payee  was  stolen,  the  date  altered,  and 
then  negotiated  to  a  bona  fide  holder.  It 
was  presented  through  the  exchanges  and 
paid  by  the  drawee  bank.  Opinion:  Bank  is 
not  liable  for  payment  of  check,  it  having 
been  negotiated  after  the  alteration  to  a 
holder  in  due  course,  who,  under  the  Nego- 
tiable Instruments  Law,  was  entitled  to  pay- 
ment according  to  its  original  tenor.  Vol.  3, 
p.  73G,  June,  1911. 

115.  (Pa.)  The  payee  altered  the  date 
of  a  cheek  drawn  by  A  to  six  months  later 
and  then  negotiated  it.  The  bank  cashing 
the  check  forwarded  it  to  A's  bank,  where  it 
was  protested.  The  payee  could  not  be  found. 
Opinion:  The  cashing  bank  cannot  recover 
from  the  drawer  if  the  alteration  was  appar- 
ent; but  if  not  apparent,  the  check  is  en- 
forceable according  to  its  original  tenor  and 
the  purchaser's  right  of  recovery  depends  on 
whether  the  check  was  negotiated  within  a 
reasonable  time  after  issue.  Vol.  7,  p.  39, 
July,  1914. 

Check  written  in  lead  pencil 

116.  (Ark.)  The  drawer  who  writes  his 
check  in  lead  pencil  is  not,  for  that  reason, 
liable  for  the  difference  to  the  purchaser  of 
such  check  after  it  has  been  raised.  Vol.  4, 
p.  752,  June,  1912. 


ATTACHMENT  AND  GARNISHMENT 


Account  owned  by  one  person  in  name 
of  another 

117.  (Ark.)  A  customer  carries  his  ac- 
count in  his  father's  name  which  is  subject 
to  checks  d^a^vn  by  him  in  father's  name. 
The  bank  is  served  with  garnishment  writ 
against  the  customer  in  his  own  name  and 
asks  whether  it  will  affect  the  balance.  Opin- 
ion: The  bank  knowing  that  the  deposit  be- 
longs to  the  customer  and  not  to  his  father, 
the  account  is  subject  to  garnishment  al- 
though carried  in  the  father's  name.  Vol.  4, 
p.  306,  Nov.,  1911. 

Attachment    of    insufficient    deposit    by 
two   creditors 

118.  (Me.)  A  bank  is  served  simultan- 
eously with  two  writs  of  trustee  process 
against  the  account  of  the  same  depositor  in 


behalf  of  different  creditors.  Each  writ 
called  for  $7,000,  and  the  deposit  amounted 
to  $13,000.  The  deposit  being  insufficient 
for  both,  the  bank  asks  which  writ  is  given 
the  preference.  Opinion:  The  rule  in  Massa- 
chusetts and  probably  in  Maine  is  that  the  re- 
spective plaintiffs  are  entitled  to  recover  an 
aliquot  part  of  the  deposit,  each  being  en- 
titled to  one-half  the  fund,  although  their 
claims  are  for  unequal  amounts.  In  Penn- 
sylvania the  rule  appears  to  be  that  each 
would  share  in  the  deposit  pro  rata,  accord- 
ing to  their  respective  claims.  In  the  instant 
case,  the  claims  being  of  equal  amount,  each 
would  take  one-half  in  anv  event.  Vol.  10, 
p.  313,  Oct.,  1917. 

Bank  garnished  for  debt  of  check  holder 

119,     (Ark.)     A  having  an  account  with 
a  bank  gave  his  check  to  B  who  indorsed  it 


14 


ATTACHMENT  AND   GARNISHMENT 


127 


over  to  C.  Before  presentment  C  was  sued 
by  creditors  and  a  writ  of  garnishment  was 
served  on  A's  bank  against  "Anything  in  your 
possession  belonging  to  C."  Opinion:  The 
garnishment  will  not  hold  good,  because  it  is 
incorrect  to  assume  that  the  bank  was  in- 
debted to  C  before  the  check  was  presented. 
Even  if  the  bank  were  indebted  to  C,  the 
order  should  require  the  surrender  of  the 
check  as  a  condition  of  making  pavment. 
Vol.  1,  p.  141,  Oct.,  1908. 

120.  (S.  Dak.)  Certain  creditors  of  A 
learned  tliat  he  was  to  receive  commissions  in 
a  land  deal.  A  bank  in  the  same  town  was 
served  with  a  writ  of  garnishment  for  any 
funds  that  might  pass  through  its  hands  be- 
longing to  A.  A's  attorney  gave  his  check 
to  A,  drax^ai  on  the  said  bank,  and  the  bank 
asks  if  it  is  proper  to  pay  the  same.  Opin- 
ion: Check  is  not  an  assignment  of  deposit 
and  drawee  bank  is  not  indebted  to  payee, 
who  is  defendant  in  garnishment  proceedings, 
and  not  liable  where  check  is  paid  to  payee 
after  service  of  writ.  Nor  is  bank  held  for 
funds  of  defendant  received  after  service  of 
writ.     Vol.  9,  p.  822,  April,  1917. 

Bank  not  indebted  at  time  writ  is  served 

121.  (Ark.)  A  customer  purchased 
drafts  from  a  bank.  The  bank  is  served  with 
garnishment  writ  against  the  customer.  At 
time  of  service,  the  customer  has  not  cashed 
the  drafts.  Opinion:  Judgment  will  not  be 
rendered  against  the  garnishee  bank  unless 
the  drafts  are  delivered  into  court  or  until 
they  mature  and  it  is  shown  the  customer 
still  holds  them.     Vol.  4,  p.  306,  Nov.,  1911. 

122.  (Wash.)  A  bank  received  a  tele- 
graphic request  from  its  correspondent  to 
pay  a  specified  person  a  certain  sum.  A  cred- 
itor of  such  person  served  a  writ  of  garnish- 
ment upon  the  bank  before  it  received  a  re- 
mittance from  its  correspondent.  Opinion: 
The  garnishment  would  not  hold,  because  the 
bank  was  not  indebted  to  the  person  at  the 
time  the  writ  was  served.  Vol.  5,  p.  664, 
April,  1913. 

Note:  Now  hy  judicial  const  ruction  of  the 
Washington  Code,  a  writ  of  parnislimcut  holds 
the  moneys  or  poods  of  defendant  in  liands  of 
garnishee  at  the  time  of  the  service  of  tlie  writ, 
or  at  any  time  tliereafter  until  the  service  of  the 
answer  of  the  garnishee,  but  not  debts  created 
between  time  of  service  of  the  answer  of  the 
garnishee  and  the  time  of  the  trial  of  the  issue. 

Bank's  obligation  to  disclose  balance 

123.  (Mich.)  A  bank  is  under  obliga- 
tion to  disclose  the  amount  of  the  balance 


wliere  it  is  garni(^hed  bv  a  creditor  of  the  cus- 
tomer.    Vol.  4,  p.  26,  July,  1911. 

Funds  represented  by  certificate  of  deposit 

124.  (III.)  Tnder  the  law  of  Illinois  a 
bank,  national  or  state,  is  not  liable  to  gar- 
nishment by  a  creditor  of  its  depositor  for 
funds  represented  by  an  outstanding  nego- 
tiable certificate  of  deposit.  Vol.  6,  p.  211, 
Sept.,  1913. 

125.  (Iowa.)  A  bank  sul)mits  tiie  fol- 
lowing form  of  certificate  of  deposit  and  asks 
Avhether  it  is  subject  to  attachment  by  cred- 
itors of  the  payee. 

''Tlie  Blank  National  Bank, 

Blank,  Iowa,  Dec.  1.  1917. 
John  Doe  has  deposited  in  this  bank  One 
Hundred  Dollars  payable  to  tiie  order  of 
himself  in  current  funds  on  the  return  of  this 
certificate  properly  indorsed  three  months 
after  date  with  interest  at  the  rate  of  4  per 
cent,  per  annum.  No  interest  after  maturity. 
Certificate  of  Deposit 

Not  subject  to  check       Cashier" 

Opinion:  A  certificate  of  deposit  in  the  hands 
of  the  payee  is  property  subject  to  attach- 
ment but  where  a  bank  is  garnished  for  funds 
represented  by  an  outstanding  negotiable  cer- 
tificate it  is  entitled,  under  the  law  of  Iowa, 
to  complete  indemnity  before  sulforing  judg- 
ment; if,  however,  the  certificate  is  non-ne- 
gotiable paper,  the  bank  can  be  charged  as 
garnishee  of  the  payee  before  notice  of  assign- 
ment. The  above  certificate  being  payable 
*'in  current  funds"  has  been  held  according 
to  Iowa  decisions  a  non-negotiable  instru- 
ment. Vol.  10,  p.  530,  Jan.,  1918.  See 
271,  272. 

126.  (R.  I.)  A  deposited  funds  in  a  na- 
tional bank  in  Khode  Island  and  received 
therefor  a  negotiable  certificate  of  deposit 
payable  to  himself.  A  creditor  of  A  seeks  to 
attach  the  deposit.  Opinion:  The  deposit  is 
exempt  from  attaclimcnt  under  the  provisions 
of  till'  l{hode  Island  statute  exempting  d(4)t.s 
scoured  by  bills  of  exchange  or  negotiable 
promissory  notes.  Vol.  9,  p.  145,  Aug.,  191(). 

127.  (R.  I.)     I>  tin-  wife  of  A,  dcposita 

money  with  a  bank  as  collateral  security  on  a 
note  discounted  by  .\  for  bis  business.  B 
wants  the  fund  free  from  attachment  and  the 
bank  advises  her  to  indorse  a  certificate  of 
deposit  in  blank  and  leave  it  with  the  bank 
accompanied  by  a  letter  stating  the  desired 
purpose.  Opinion:  A  creditor  of  the  hus- 
band would  have  no  right  to  att<ach  a  fund  l>c- 
longing  to  the  wife  specially  pledged  by  her 


15 


128 


DK!EST  OF  LEGAL  OPINIONS 


as  security  for  lior  luishaiid's  deljt.  In  Rhode 
Island  a  deposit  represented  l)y  an  outstand- 
ing nefifotiablc  certificate  is  exempt  from  at- 
tachment; but  the  certificate  itself  is  subject 
to  seizure  l)y  cr<Mlitors  of  the  owner.  Vol.  5, 
J).  ()70,  April,  l!)i;3. 

Funds  represented  by  outstanding  nego- 
tiable instrument 

128.  (Ala.)  A  bouglit  a  pair  of  mules 
from  B  giving  his  note  in  payment,  payable 
to  B's  wife.  C  had  judgment  against  B  and 
served  a  writ  of  garnishment  on  A  for  the 
amount.  Later  D  bought  the  note  with  no 
notice  of  the  garnishment,  and  C  claims  the 
amount  of  the  garnishment  out  of  the  note. 
Opinion:  In  Alal)ama,  while  a  negotiable  note 
is  current  as  negotiable  paper  and  subject  to 
be  transferred  to  a  bona  fide  purchaser  with- 
out notice  and  before  maturity,  the  maker  of 
the  note  is  not  subject  to  garnishment,  nor 
chargeable  as  a  garnishee  of  the  original 
payee  of  the  note.  A's  answer  shows  his  only 
indebtedness  was  to  B  on  a  note  not  yet  ma- 
tured made  payable  to  B's  wife,  in  which  case 
A  would  not  be  chargeable  as  garnishee.  Vol. 
11,  p.  328,  Dec.,  1918. 

129.  (111.)  A  purchased  a  draft  issued 
by  a  bank  in  favor  of  B.  A  claimed  that  B 
lost  the  draft  and  requested  a  duplicate.  Be- 
fore the  duplicate  was  issued,  a  creditor  of  B 
serves  a  writ  of  attachment  upon  the  maker 
of  the  draft.  Opinion:  Where  a  negotiable 
draft  has  been  issued  by  a  bank  and  it  is  out- 
standing, the  drawer  is  not  liable  to  garnish- 
ment in  suit  of  a  creditor  against  the  payee, 
imder  the  law  of  Illinois,  unless  it  can  be 
shown  that  the  draft  has  matured  and  is  still 
in  the  hands  of  the  payee.  The  bank  should 
not  issue  a  duplicate  draft  unless  indemnified 
against  loss.     Vol.  9,  p.  46,  July,  1916. 

130.  (Tex.)  A  bank  issued  its  cashier's 
check  of  $1,000  to  its  customer,  whose  account 
was  later  garnished  while  the  check  was  still 
outstanding.  The  customer  had  nothing  to 
his  credit  in  open  account  and  the  bank  seeks 
to  know  its  liability  as  garnishee  at  suit  of 
the  creditor.  Opinion:  Where  a  bank  has 
issued  a  cashier's  check  which  is  outstanding 
and  unpaid,  it  is  not  liable  as  garnishee  at 
suit  of  a  creditor  of  the  payee,  or  indorsee 
unless  the  check  is  shown  to  be  in  the  hands 
of  such  payee  or  indorsee  after  maturity; 
that  is  to  say,  after  such  time  as  it  would  be 
presumed  overdue  so  that  it^  transfer  there- 
after would  subject  the  subsequent  taker  to 
equities.     Vol.  10,  p.  781,  May,  1918. 


Notice  with  incorrect  name 

131.  (Ala.)  A  bank  having  funds  only 
of  "John  Jones,  Agent"  is  served  with  a  writ 
of  garnishment  against  the  funds  of  "John 
Jones."  The  bank  disregarded  the  writ  and 
was  threatened  with  a  damage  suit  because 
the  funds  in  fact  belonged  to  John  Jones. 
Opinion:  The  bank  not  knowing  the  real 
owner  of  the  funds  should  not  have  taken  the 
risk  of  answering  that  it  was  not  indebted 
to  Jones  and  then  subsequently  paying  him 
the  money  on  his  check  as  agent.  Vol,  5, 
p.  588,  March,  1913. 

132.  (Minn.)  A  garnishment  notice 
was  served  on  a  bank  charging  funds 
of  Mary  Smith,  and  Ijank  carries  an  account 
in  the  name  of  Mrs.  James  Smith,  and  subse- 
quently pays  without  knowledge  or  notice  of 
the  identity  of  the  two.  Opinion:  The  bank 
is  not  liable  for  the  amount  of  Mrs.  James 
Smith's  deposit,  as  it  has  no  knowledge  or 
notice  of  its  depositor's  identity,  and  there 
were  no  circumstances  which  would  charge  it 
with  the  duty  of  making  inquirv  as  to  such 
identity.     Vol.  9,  p.  821,  April,  1917. 

Precedence  over  checks  not  presented  be- 
fore service  of  writ 

133.  (111.)  A  depositor  had  a  balance  of 
$•±0,  which  amount  was  garnished  on  Jan.  10, 
1912.  Two  checks  of  $5  and  $10,  drawn 
prior  to  Jan.  10  were  presented  after  the  ser- 
vice of  the  writ.  Opinion:  The  garnishment 
takes  precedence  over  the  checks  dated  before 
but  not  presented  until  after  the  service  of 
the  writ.  Deposits  made  after  the  service  of 
the  writ  are  not  covered  by  it.  Vol.  4,  p.  489, 
Feb.,  1912. 

134.  (Mo.)  The  check  of  a  depositor 
was  presented  after  a  writ  of  garnishment 
Avas  served  attaching  the  deposit.  The  check 
was  issued  before  the  service  of  the  writ. 
Opinion:  The  writ  of  garnishment  takes  pre- 
cedence over  the  outstanding  check,  because 
the  check  of  itself  is  not  an  assignment  of 
the  deposit,  and  the  bank  is  not  liable  to  the 
holder  unless  and  until  it  accepts  or  certifies 
the  check.    Vol.  9,  p.  146,  Aug.,  1916. 

135.  (R.  I.)  A  check  comes  to  a  bank 
for  payment  through  its  correspondent  arriv- 
ing at  8.30  A.  M.,  and  is  charged  to  the  cus- 
tomer's account  between  11  and  12  o'clock. 
At  9.01  A.  M.  the  account  is  attached.  The 
bank  asks  which  takes  precedence.  Opinion: 
A  writ  of  garnishment  served  against  a  de- 
posit account  at  9.01  A.  M.  takes  precedence 


16 


ATTACHMENT  AND   GA"RNISHMEXT 


143 


over  the  debtor's  check  received  throu<,di  the 
mail  at  8.30  A.  M.  but  not  charged  against 
his  account  until  11  A.  M.  There  appears 
to  be  no  reason  why  a  writ  of  attachment 
against  a  bank  served  upon  the  proper  officer 
at  the  bank  cannot  be  just  as  eii'ective  when 
served  during  non-banking  hours  at  it  would 
be  when  served  during  banking  hours.  Vol. 
11,  p.  98,  Aug.,  1918. 

Proceeds  of  bill  of  lading  draft 

See  Bills  of  lading,  244-2(50 

136.  (Mich.)  A  draft  with  bill  of  lad- 
ing attached  was  received  by  a  bank  from  its 
customer  for  collection.  It  was  forwarded 
to  a  collecting  bank  and  the  payor  after  pay- 
ing the  draft  immediately  garnislied  the  pro- 
ceeds for  an  indebtedness  of  the  customer. 
The  customer  was  obliged  to  settle  on  the 
payor's  terms  and  it  is  claimed  that  the  col- 
lecting bank  wrongfully  withlield  the  funds, 
and  tiiat  they  could  not  legally  be  reached  by 
garnishment  proceedings.  Opinion:  Where 
the  proceeds  of  a  bill  of  lading  draft  are  gar- 
nished in  the  hands  of  collecting  bank  for  in- 
debtedness of  the  shipper,  the  garnishing 
creditor  is  not  entitled  to  the  proceeds  if  the 
draft  has  been  sold  by  the  shipper  prior  to 
collection.  But  if  the  bank  was  merely  an 
agent  for  collection,  and  the  proceeds  be- 
longed to  the  customer,  the  amount  would  be 
subject  to  garnishment  proceedings.  The 
duty  of  the  collecting  bank  when  served  with 
process  of  garnishment  is  to  advise  the  for- 
warding bank  of  the  service  of  the  writ.  If 
the  forwarding  bank  claimed  the  funds  as  its 
property,  the  collecting  bank  should  make 
due  answer,  naming  the  bank  as  owner,  and 
pay  funds  into  court  taking  receipt  therefor. 
If  the  customer  owned  proceeds,  he  should 
have  opportunity  to  contest  proceedings  to 
release  the  funds  under  bond.  Vol.  10,  p. 
312,  Oct.,  1917. 

137.  (Mo.)  A  l)ank  forwarded  for  col- 
lection a  draft  with  a  bill  of  lading  attached. 
The  proceeds  were  garnished  in  tiie  hands  of 
the  drawee  bank  because  of  a  claimed  short- 
age, but  the  ])rosecution  of  the  garnishment 
proceedings  has  been  delayed  three  years. 
Opinion:  Application  for  dismissal  of  the 
proceedings  because  of  undue  delay  should 
be  made;  it  the  proceeds  belonged  to  the  dis- 
counting bank  they  are  not  subject  in  any 
event  to  garnishment  by  a  creditor  of  the 
shipper.     Vol.  8,  p.  801,  :March,  191G. 

138.  (Tex.)  A  bank  purchased  from  its 
customer  a  draft  with  a  bill  of  lading  at- 
tached, and  forwarded  it  for  collection  to  a 


neighboring  bank.  The  latter  bank,  being  a 
creditor  of  the  shipper,  attached  the  proceeds 
in  its  hands  and  refused  to  transmit  the 
amount  to  the  purchaser  of  the  draft.  Opin- 
ion: Bank  purchasing  draft  with  bill  of  la- 
ding attached  has  a  right  to  the  goods,  or  to 
the  proceeds  of  the  draft  when  paid,  superior 
to  an  attaching  creditor  of  the  shipper.  Vol. 
10,  p.  853,  June,  1!>18. 

Proceedings  may  be  instituted  before 
judgment 

139.  (Okla.)  A  customer  overdrew  his 
account  in  a  bank  and  opened  up  a  new  ac- 
count in  anotlier  bank  in  Oklahoma.  The 
creditor  bank  wishes  to  garnish  the  new  ac- 
count. Opinion:  The  creditor  bank  should 
bring  an  action  against  its  del)tor  and  after 
the  action  is  brought,  proceed  at  once  by 
writ  of  garnishment  against  the  otlier  bank. 
Oarnishment  proceedings  may  be  instituted 
before  judgment  against  the  principal  debtor 
under  the  laws  of  Oklahoma  but  the  plaintiff 
nuist  have  judgment  in  the  princijial  action 
I)efore  trial  can  be  had  in  the  garnishee  ac- 
tion.    A'ol.  5,  p.  TjI,  :Mav,  1!I13. 

Property  subject  to  garnishment 

140.  (Cal.)  A  bank  rentiil  a  .safe  de- 
posit box  to  a  holder,  giving  him  two  keys 
and  keeping  a  master  key  for  all  of  the  boxes 
held.  A  creditor  of  the  box  holder  desires 
to  attach  the  contents  of  the  box.  Opinion: 
The  contents  of  the  safe  deposit  box  belong- 
ing to  a  box  renter  are  subject  to  attachment, 
and  according  to  the  weight  of  more  recent 
authority  the  bank  may  also  be  garnished  for 
such  contents.     Vol.  (i,  p.  505,  Jan.,  1014. 

141.  (Idaho.)  A  savings  account  is  sub- 
ject to  garnishment,  and  it  is  doul)tful  if  the 
garnishee  bank  can  require  n-turn  of  the 
book,  as  it  is  the  property  of  the  dej)ositor  and 
is  not  negotiable.  The  dilTerence  between  a 
negotiable  certificate  of  dejiosit  and  a  savings 
bank  book  with  respect  to  attachment  or  gar- 
nishment proceedings  is  that  in  case  of  a  ne- 
gotialde  certificate  the  debt  of  the  bank  runs 
to  the  holder  of  the  certificate  and  not  to  the 
oriirinal  depositor.  Vol.  10,  j).  3S0,  Nov., 
1917. 

142.  (Mich.)  An  account  rej)rescntcd 
by  a  savings  i)aidv  pass-book  is  subject  to  gar- 
nishment.    Vol.  4,  p.  21(),  Oct.,  1911. 

143.  (Mont.)  In  Mont-ana,  where  a 
bank  is  served  with  a  writ  of  attachment  of 
moneys  owing  its  depositor,  it  is  only  liable 
for  the  amount  of  the  balance  to  the  credit  of 
the  depositor  at  the  time  the  write  is  served. 


17 


144 


Dir^KST  OF  LF/IAL  OPIMOXS 


This  rule  also  liolds  in  California,  (^miiccli- 
cut,  (jicorgia,  Iowa,  Kansas,  iMaino,  Michij^an, 
Minnesota,  Texas  and  Wisconsin.  The  statutes 
in  Alabama,  Arkansas,  Illinois,  Maryland, 
Massachusetts,  Missouri,  New  Hampshire, 
North  Carolina,  rcnnsylvania,  Vermont, 
West  Vir<finia  and  Washint^ton,  hold  the  bank 
liable  for  subsequent  deposits.  Vol.  11,  p. 
G73,  June,  1!)19. 

144.  (Ore.)  A  savings  account  is  sub- 
ject to  attachment,  but  if  the  account  has 
been  assigned  before  the  service  of  the  writ  of 
attachment  on  the  bank,  the  assignee  is  pro- 
tected, whether  or  not  the  bank  has  been  no- 
tified of  the  assignment.  Vol.  9,  p.  826, 
April,  1917, 

145.  (Wash.)  An  account  in  a  savings 
bank  equally  as  in  a  commercial  bank  is  sub- 
ject to  garnishment  by  a  creditor  of  the  de- 
positor in  the  absence  of  a  statute  exempting 
such  an  account  from  garnishment.  Vol.  7, 
p.  308,  Nov.,  1914. 

Set  off  by  bank  to  defeat  attachment 

146.  (Kan.)  A  bank  makes  a  loan  to  a 
customer  and  credits  him  with  the  proceeds. 
Before  the  proceeds  are  checked  out,  the  ac- 
count is  garnished  and  the  bank  desires  to 
cancel  the  credit.  Opinion:  The  mere  fact 
that  the  account  is  garnished  before  the  pro- 
ceeds are  checked  out  will  not  entitle  the  bank 
to  cancel  the  credit.     But  if  the  loan  was 


obtained  Ijy  fraud,  the  credit  may  be  cancelled 
or  if  the  customer  has  become  insolvent  the 
bank  may,  according  to  the  law  of  some  states 
(Ca.,  Iowa,  Ky.,  Mass.,  Minn.,  Tenn.,  N.  J., 
Ohio,  N.  C.  and  Texas)  a  contrary  rule  ob- 
taining in  other  state  (Ala.,  Miss.,  N.  Y., 
Pa.,  K.  I.,  8.  C.  and  Wis.)  set  off  the  insolvent 
customer's  deposit  against  his  unmatured 
indebtedness.     Vol.  9,  p.  502,  Dec,  191G. 

147.  (Mont.)  A  creditor  learning  that 
its  debtor  had  a  deposit  in  a  certain  l)ank  at- 
tached the  funds.  The  bank  who  owned  a 
past  due  note  of  the  same  debtor  set  off  his 
deposit  against  the  note  so  as  to  defeat  the 
attachment  and  made  a  return  to  the  sheriff 
on  the  balance  remaining  after  its  note  was 
paid.  Opinion:  The  bank  had  the  right  to 
make  such  set  off  and  such  right,  although 
subsequently  exercised,  existed  prior  to  the 
attachment  and  enabled  the  bank  to  take 
priority  over  the  attaching  creditor.  Vol. 
4,  p.  95,  Aug.,  1911. 

148.  (W.  Va.)  A  customer  having  a 
balance  with  his  bank  of  $500  was  indebted 
to  the  bank  on  a  matured  note  of  $2,500.  A 
writ  of  garnishment  was  served  upon  the 
bank  by  a  creditor  of  the  customer  on  the 
same  day  the  note  was  due.  Opinion:  The 
bank  owning  the  note  had  a  right  to  set  off 
the  deposit  against  the  note  and  make  reply 
that  it  was  not  indebted  to  its  depositor.  Vol. 
6,  p.  756,  May,  1914. 


ATTORNEY'S  FEES 


Attorney's  fee  note  payable  at  bank 

149.  (Ariz.)  A  local  attorney  presented 
a  past  due  note  payable  at  a  bank  for  pa}'- 
nient,  adding  thereto  ten  per  cent,  for  his 
fees,  in  accordance  with  clause  expressed  in 
the  note :  "If  this  note  is  not  paid  when  due 
and  is  collected  by  attorney  or  legal  proceed- 
ings, we  promise  to  pay  an  additional  sum  of 
10  per  cent,  of  the  amount  of  this  note  as  at- 
torney's fees."  The  bank  asks  (1)  whether 
it  should  pay  without  the  special  authoriza- 
tion of  the  maker  and  (2)  was  the  amount 
collectible  on  the  note  merely  its  face  value 
or  the  protest  fees  in  addition.  Opinion: 
Where  a  note  providing  for  attorney's  fees  if 
not  paid  when  due  and  collected  by  an  at- 
torney is  made  payable  at  a  bank  in  which 
the  maker  has  sufficient  fimds  at  maturity 
and  the  note  is  not  presented  until  after  ma- 
turity and  then  by  an  attorney,  it  is  (1) 
doubtful  whether  the  bank  has  authority  to 


pay  the  overdue  note  without  express  author- 
ization from  the  maker,  and  (2)  in  any  event 
the  amount  collectible  is  the  face  of  the  note, 
without  attorney's  fees.  The  safest  course 
for  the  bank  is  to  obtain  an  express  instruc- 
tion from  the  maker  of  the  note.  Vol.  11, 
p.  437,  Feb.,  1919. 

Claim  of  attorney's  fee  in  bankruptcy 
150.  (Miss.)  The  maker  of  a  note,  con- 
taining a  provision  for  the  payment  of  an  at- 
torney's fee  of  fifteen  per  cent,  if  not  paid  at 
maturity,  became  a  bankrupt  before  the  note 
fell  due.  The  receivers  of  the  bankrupt  es- 
tate refused  to  pay  the  additional  attorney's 
fee.  Opinion:  The  claim  for  the  attorney's 
fee  upon  the  note  which  did  not  mature  until 
after  the  maker  became  bankrupt  was  not 
provable  against  his  estate,  because  such 
claim  is  not  ''a  fixed  liability  absolute^  owing 
at  the  time  of  the  filing  of  the  petition  in 
bankruptcy."     Vol.  8,  p.  143,  Aug.,  1915. 


18 


ATTORXEY'S  FEES 


159 


Negotiability  of  notes  with  attorney's  fee 
clause 

151.  (Mo.)  The  Xegotiable  Instru- 
ments Act  provides  that  the  instrument  shall 
be  negotiable  although  it  is  payable  "with 
costs  of  collection  or  an  attorney's  fee  in  case 
payment  shall  not  be  made  at  maturity,"  and 
any  clause  which  sufiiciently  conforms  to 
such  provision  will  not  affect  the  negotia- 
bility of  the  instrument.  Vol.  G,  p.  630, 
March,  1914. 

152.  (Mo.)  A  note  containing  a  clause 
providing  for  the  payment  of  an  attorney's 
fee  in  case  payment  is  not  made  at  maturity 
is  valid  in  Missouri  and  negotiable  under  the 
provisions  of  the  Negotiable  Instruments  Act. 
Vol.  6,  p.  G30,  March,  1914. 

153.  (N.  J.)  Under  the  law  of  New  Jersey 
a  note  containing  a  provision  for  attorney's 
fee  if  not  paid  at  maturity  is  both  valid  and 
negotiable.  The  following  clause  if  inserted 
in  a  note  is  valid  and  the  note  negotiable : 
"I  further  agree  that  if  this  note  is  not  paid 
when  due  to  pay  all  cost  necessary  for  collec- 
tion, including  ton  per  cent,  for  attornev's 
fees."     Vol.  8,  p.  419,  Nov.,  1915. 

154.  (N.  Y.)  The  face  of  a  note  con- 
tains the  following  statement :  "The  maker  of 
this  note  hereby  agrees  in  the  event  of  non- 
payment of  the  note  when  due  to  pay  an 
amount  equal  to  10  per  cent,  of  the  face  of 
the  note  as  attorney's  fees,  if  such  an  amount 
shall  be  charged  as  attorney's  fees  for  the  col- 
lection of  the  note."  Question  is  raised  as 
to  the  validity  of  this  clause  and  negotiability 
of  note  under  the  law  of  New  York. 
Opinion:  The  note  is  negotiable  under  the 
Negotiable  Instruments  Law,  and  the  clause 
providing  for  attorney's  fees  although  not 
specifically  passed  upon  by  a  New  York  Court 
would  undouhtodlv  l)e  held  to  be  valid  and 
enforceable.     Vol.'  9,  p.  824,  April,  1917. 

155.  (Okla.)  Negotialde  Instruments 
Act  makes  note  negotiable  although  it  is  pay- 
able "with  costs  of  collection  or  an  attorney's 
fee  in  case  payment  shall  not  be  made  at  ma- 
turity." Opinion:  A  note  containing  clause 
promising  to  pay  "as  collection  foes,  tlie  ad- 
ditional sum  of  10  ])er  centum  of  ])rin(ipal 
then  due,  if  collection  bo  made  through  at- 
torney" is  negotiable  under  Act.  Vol.  G, 
p.  630,  March,  1914. 

'Validity  of  attorney's  fee  clause 

156.  (Ark.)  In  Arkansas  the  courts 
have  held  that  the  stipulation  for  an  attor- 


ney's fee  does  not  affect  the  negotiability  of 
a  note,  but  that  the  stipulation  is  itself  void 
and  unenforceable.  The  subsequent  passage 
of  the  Negotiable  Instruments  Act  may  or 
may  not  validate  such  stipulation.  Vol.  7, 
p.  773.  April,  1915. 

157.  (Ark)  Upon  the  question  of  the 
effect  of  a  stipulation  for  attorney's  fees  in 
promissory  notes,  the  four  following  con- 
flicting views  before  the  Negotiable  Instru- 
ments Act  were  held  in  the  various  states: 
(1)  that  which  sustains  both  the  validity  of 
the  provision  and  the  negotiability  of  tlie  in- 
strument; (2)  that  which  holds  that  the  pro- 
vision is  valid  and  enforceable  but  that  it  de- 
stroys negotiability;  (3)  that  which  holds 
that  negotiability  is  not  affected  but  the  pro- 
vision is  void  and  unenforceable,  and  (4) 
that  which  holds  that  the  provision  for  an  ad- 
ditional amount  as  attorney  fee  above  the 
higiiest  rate  of  interest  allowable  renders  the 
transaction  usurious.  The  Negotiable  Instru- 
ments Act  which  declares  that  the  negotia- 
bility is  unaffected  by  a  provision  for  attor- 
ney's fee  "in  case  payment  shall  not  be  made 
at  maturity"  leaves  uncertain  the  question 
whether  such  provision  is  valid  and  enforce- 
able in  those  states  which  held  it  void  before 
the  Act  was  passed.  In  Ohio  and  West  Vir- 
ginia the  Act  does  not  validate  the  attorney 
fee  provision;  but  in  Virginia  and  Colorado 
such  provision  under  the  Act  is  held  valid. 
In  Nebraska,  North  Carolina  and  South  Da- 
kota the  Negotiable  Instruments  Act  itself 
expressly  provides  that  nothing  in  the  Act 
shall  be  construed  to  authorize  the  enforce- 
ment of  the  stipulation  for  the  attorney's  fee. 
A^ol.  7,  p.  773,  April,  1915. 

158.  (Ind.)  In  Ohio,  stii>ulations  in 
promissory  notes  providing  for  attorney's  fees 
are  against  public  policy,  void  and  unenforce- 
able, and  the  Su])reme  Court  of  Ohio  has 
held  that  the  provision  of  the  Negotiable  In- 
struments Act  providing  that  buch  stipula- 
tions do  not  all'ect  negotial)ilitv,  does  not 
make  them  valid.     Vol.  6,  p.  759",  May,  1914. 

159.  (Mich.)  A  note  in  Michigan  con- 
tained the  following  provision:  "I  further 
agree  to  pay  ten  per  cent,  additional  as  at- 
torney fee,  if  this  note  is  not  jiaid  when  due, 
and  is  coll(>ited  by  or  through  an  attorney  at 
law."  Opinion:  Prior  to  tlic  passage  of  the 
Negotiable  Instruments  Act  in  Michigan, 
the  attorney  fee  provision  was  void  and  un- 
enforceable but  under  the  Act  which  makes 
a  note  containing  such  a  clause  negotiable  it 
has  not  been  deci<led  in  Michigan  whether  or 
not  such  provision  is  thereby  validated  and 


19 


IGO 


du;kst  of  legal  oimxioxs 


ilie  few  (k'C'isioiis  upon   tlic   point  in   other 
states  connict.     Vol.  8,  p.  701,  Feb.,  liHG. 

160.  (Neb.)  Under  the  })reseni  hnv  of 
Nchraska,  a  provision  in  a  inort<,'af(e  that  in 
the  event  of  foreclosure  the  defenchuit  siiall 
pay  a  reasonable  attorney's  fee,  to  be  deter- 
mined by  tlie  court  and  taxed  as  costs  in  the 
case,  is  invalid  and  not  enforceable.  Sucli  a 
stij)ulation  would  not  affect  the  ne2;otial)ility 
of  a  note.  For  tlie  history  of  the  law  of  th(! 
state  on  the  subject  see  Vol.  8,  p.  249,  Sept., 
l!)ir). 

161.  (Okla.)  In  Oklahoma  a  note  pro- 
viding for  "a  reasonable  amount"  as  attor- 
ney's fee  if  not  paid  at  maturity  is  negotiable, 
and  should  suit  be  commenced  would  be  en- 
forceable for  a  reasonable  amount  charged  by 
the  attorney  Avhen  pleaded  and  proved ;  and  a 
note  providing  for  "ten  per  cent."  attorney's 
fee  would  be  enforceable  for  that  amount,  in 
the  absence  of  plea  or  proof  that  such  fee  was 
unreasonable.     Vol.  8,  p.  29,  July,  1915. 


162.  (S.  Dak.)  In  South  Dakota,  the 
]ir(n  ision  for  an  attc^rney's  fee  in  a  promissory 
note  has  been  held  void  and  unenforceable, 
but  does  not  afl'ec^t  its  negotiability.  In  pass- 
ing the  Negotiable  Instruments  Act,  the  leg- 
islature eliminated  the  provision  that  negotia- 
bility is  not  affected  by  the  attorney  fee  clause 
and  substituted  a  provision  that  nothing  in 
the  Act  should  authorize  inclusion  in  a  judg- 
ment on  an  instrument  a  sum  for  attorney's 
fees  or  any  other  costs  not  now  taxable  by 
law.     Vol.  7,  p.  774,  April,  191;j. 

163.  (W.  Va.)  While  in  the  far  greater 
number  of  states  attorney's  fee  notes  are  both 
negotiable  and  valid  as  to  attorney's  fees,  the 
question  remains  undecided  in  those  states, 
such  as  Virginia,  where  the  courts  have  held 
such  stipulations  to  be  penalties  and  against 
public  policy  and  void,  and  the  legislature 
has  later  enacted  the  Negotiable  Instruments 
Act  whether  such  Act  abrogates  the  decisions 
and  validates  such  stipulations.  The  proba- 
bility is  that  the  Act  would  be  held  to  validate 
such  provisions.     Vol.  4,  p.  215,  Oct.,  1911. 


BANKS  AND  BANKING 

See  National  Banks,  870-887;  Branch  Banks,  261-265 


Examination  of  books  and  records 
See   175,  22G,  227 

164.  (Mich.)  In  a  suit  by  a  bank 
against  a  depositor,  the  defense  requested  the 
bank  to  produce  its  books  and  records  from 
1890  to  date  for  the  use  of  the  defendant's  at- 
torney for  such  time  as  he  may  take  to  pre- 
]iare  his  defense.  Upon  the  bank's  refusal 
the  defendant  proposes  to  serve  the  process 
of  subpoena  duces  tecum.  Opinion:  In  suit 
by  bank  against  depositor,  bank  officer  served 
with  subpoena  duces  tecinn  must  produce 
books  called  for  containing  evidence  relating 
to  transaction,  in  absence  of  statute  permit- 
ting authenticated  copy — but  if  subpoena  is 
unreasonable  in  its  requirements  bank  may  be 
protected  under  the  search  and  seizure  clause 
of  the  Fourth  Amendment  to  the  Federal 
Constitution.     Vol.  11,  p.  331,  Dec,  1918. 

165.  (Okla.)  In  a  suit  by  a  depositor 
against  a  bank,  an  officer  served  with  a  sub- 
poena duces  iecum  must  produce  the  books 
called  for  containing  evidence  relating  to  the 
transaction  in  the  absence  of  a  statute  per- 
mitting an  authenticated  copy.  Inconve- 
nience to  the  bank  or  to  the  officer  does  not 
justifv  his  refusal  to  obey  the  court  order. 
Vol.  7,  p.  686,  March,  1915. 


Use  of  loose  leaf  books 

166.  (Wis.)  The  AYisconsin  legislature 
requires  the  books  of  original  entry  used  in 
banks  to  be  permanently  bound  and  prohibits 
the  card  system  as  a  sulistitute  for  a  bank 
ledger.  This  is  probably  the  only  state  legis- 
lation wdiich  prohibits  the  use  of  loose  leaf 
books  in  banks.     Vol.  4,  p.  375,  Dec,  1914. 

Bank  as  agent  to  procure  loan 

167.  (Mo.)  Bank  A  offered  to  procure 
a  loan  for  Bank  B  which  proposition  was  ac- 
cepted. Thereupon  Bank  A  sent  a  note  it 
had  discounted  to  Bank  B,  which  was  taken 
by  the  latter  thinking  it  was  an  outside  loan. 
The  note  owned  by  Bank  A  was  worthless. 
Opinion :  Bank  A  would  be  liable  to  Bank 
B.  It  is  a  breach  of  duty  for  an  agent  em- 
ployed to  make  an  investment  for  his  prin- 
cipal to  supply  investments  out  of  his  own 
property  imless  done  with  knowledge  and  con- 
sent of  the  principal.  Vol.  4,  p.  753,  June, 
1912. 

Bank   as  borrower  on   personal   note   of 
executive  officer 

168.  (Neb.)  The  cashier  and  manager 
of  a  bank  desiring  to  procure  a  loan  for  the 


20 


BAXKS  AND  BANKING 


[17-4 


bank,  gave  his  personal  note  secured  by  his 
bank  stock.  The  money  passed  to  the  bank, 
but  the  loan  did  not  appear  on  the  books  or 
reports  of  the  bank  as  a  liability.  There 
was  no  written  disclaimer  from  the  lender 
bank  that  they  did  not  in  any  way  hold  the 
borrowing  bank.  Opinion:  The  circum- 
stances would  probably  be  held  to  evidence  a 
loan  and  benefit  to  the  bank  and  that  the 
cashier  pledged  his  personal  stock  as  security 
and  therefore  the  bank  would  be  liable. 
Wlictlier  the  loan  is  to  the  cashier  or  to  the 
bank  is  tested  byHhe  inquiry  for  whose  bene- 
fit the  loan  is  made,  which  is  based  upon  the 
entire  circumstances  constituting  the  contract 
and  not  on  the  form  of  the  note  alone,  and 
sometimes  on  tlie  ratification  of  tlie  loan  by 
the  bank.     Vol.  8,  p.  140,  Aug.,  1915. 

169.  (Neb.)  A  bank  discounted  the  per- 
sonal note  of  the  cashier  of  anotlier  bank  and 
the  proceeds  were  placed  to  the  credit  of  tlie 
bank  sending  the  note.  Tlie  lender  bank 
also  accepted  as  collateral,  notes  with  t!ie 
payee  blank  unfilled.  Opinion:  The  dis- 
counting of  the  personal  note  of  the  cashier 
of  anotlier  bank  and  crediting  such  bank 
with  the  proceeds  would  probably  be  held  a 
transaction  with  the  bank,  which  would  make 
it  liable  on  the  note.  Where  collateral  con- 
sists of  notes  with  the  payee  blank  unfilled, 
the  lender  bank  is  put  on  inquiry  and  takes 
subject  to  tlie  maker's  defenses.  Vol.  6,  p. 
577,  Feb.,  1914. 

Banking  hours 
Sec   1,   1101,   1102,   11G4,   1100 

170.  (Mo.)  The  banks  in  a  city  in  Mis- 
souri agreed  to  change  their  banking  hours  by 
closing  Thursday  afternoon  during  July  ami 
August.  The  banks  question  the  legal  right 
to  close  and  what  would  be  tlieir  lial)ility  in 
case  a  check  was  presented  on  Thursday  after- 
noon and  payment  refused.  Opinion:  Bank- 
ing hours  are  not  estalilished  by  law,  but  by 
the  banks  themselves.  The  courts  hold  that 
ltaid\s  may  establish  reasonal)le  hours  for 
transaction  of  business.  It  is  competent  for 
the  banks  in  question  to  cliange  the  banking 
hours  as  indicated,  and  the  changed  banking 
liours  having  been  announced  to  the  ])ublic 
by  advertisement,  a  check  afterwards  pre- 
sented on  Thursday  afternoon  will  not  be 
subject  to  protest.  Vol.  9,  p.  983,  June, 
1917. 

171.  (N.  C.)  An  express  company  ten- 
dered a  package  of  money  to  a  bank  in  North 
Carolina  at  7  o'clock  in  the  evening  upon  the 


arrival  of  tlie  train.  The  bank  refused  to 
accept  the  shipment  at  that  time  of  the  night, 
while  the  company  claimed  that  it  had  no 
safe  place  to  store  the  money  over  night  and 
refused  to  make  further  shipments  unless  the 
bank  keeps  open  to  receive  them  at  7  P.  ^l. 
Opinion:  A  tender  of  delivery  of  an  express 
package  of  money  to  a  bank  is  sufficient  if 
made  within  the  reasonable  business  hours 
general  to  the  place,  although  such  tender  is 
made  after  the  close  of  banking  liours.  What 
is  a  reasonalde  time  for  delivery  is  a  question 
for  the  jury  and  in  this  case  7  o'clock  at  night 
in  the  winter  time  might  be  held  an  un- 
reasonable time.  In  no  event  can  the  express 
company,  being  a  common  carrier,  discon- 
tinue handling  shipments  to  the  bank.  Vol. 
7,  p.  G87,  Marcli,  1915. 

General  duty  of  secrecy  as  to  customer's 
affairs 

172.  (Conn.)  The  banking  law  of 
('onnccticiit  docs  not  prohibit  a  l)ank  official 
from  giving  information  that  a  certain  person 
has  an  account  in  the  bank,  whether  it  be  a 
savings  or  commercial  account,  and  provides 
no  penalty  for  the  giving  of  such  informa- 
tion. Relation  of  banker  and  customer 
creates  duty  of  secrecy,  and  banker  should  not 
disclose  information  as  to  account  or  affairs 
of  customer,  except  under  legal  compulsion ; 
but  in  absence  of  statute,  no  legal  conse- 
quences would  follow  breach  of  tliis  duty  by 
])anker  except  a  possible  lial^ility  in  damages 
in  case  customer  could  prove  injury.  Vol.  7, 
p.  169,  Sept.,  1914.     ISee  477,  1324. 

Compulsory     disclosure     of     customer's 

balance  for  tax  purposes,  etc. 

See    503 

173.  (La.)  The  Collector  of  Internal 
I\c venue,  wiio  is  authorized  "to  take  evidence 
touching  any  part  of  the  administration  of 
Internal  Revenue  Laws,''  would  presumably 
be  acting  within  the  scope  of  his  authority  if 
in  a  given  case  he  required  a  bank  olfieer  to 
irive  information  whether  or  not  a  dejiositor's 
check  was  paid.     Vol.  3.  p.  10,  July,  1910. 

174.  (N.  Y.)  A  tax  assessor  being  a  di- 
rector in  a  rival  concern  demanded  of  a  bank 
tliat  it  furnish  a  statement  of  the  names  of 
its  stockholders  with  tlie  number  of  shares 
held  by  eacli,  under  penalty,  tlie  information 
probably  to  be  used  1)V  the  assessor  to  an  un- 
fair advantage.  Opinion:  Tlie  bank  was 
obliged  to  make  the  required  statement,  and 
the    assessor    could    be    removed    if    found 


21 


175 


DIGEST  OF  LEGAL  Ui'lMOXS 


guilty  of  using  the  infoniiatioii   in  an   im- 
proper way.     Vol.  5,  p.  21,  July,  1912. 

175.  (Pa.)  The  depositor  of  a  hank 
made  returns  to  a  tax  assessor  which  did  not 
suit  the  oflicer.  The  assessor  attempted  to 
(jet  information  from  the  hank  concerning 
the  depositor's  balance.  Opinion:  Decisions 
protect  hank  ofhcers  from  heing  compelled  to 
make  disclosure  of  names  of  depositors  in 
gross  and  amounts  of  their  deposits  for  pur- 
poses of  taxation — but  in  a  proper  proceed- 
ing against  one  or  more  depositors,  specified 
by  name,  a  bank  officer  is  not  privileged  to 
refuse  to  produce  books  and  testify  as  to  bal- 
ances of  such  depositors.  Vol.  5,  p.  515, 
Feb.,  1913. 

176.  (Va.)  In  a  proper  legal  proceed- 
ing against  a  customer,  the  bank's  officer  can 
be  compelled  to  state  the  amount  of  his  bal- 
ance, the  information  not  being  privileged  in 
a  legal  sense.  This  case  is  differentiated 
from  those  where  the  wholesale  disclosure  of 
all  of  the  depositors'  balances  is  sought  for 
tax  purposes,  wherein  the  right  to  compel  dis- 
closure has  been  denied.  Vol.  6,  p.  431,  Dec, 
1913. 

Guaranty  by  bank 
See  874 

177.  (Kan.)  A  state  bank  in  Kansas 
wired  that  it  would  guarantee  to  pay  a  draft 
by  a  drawer  in  Texas  upon  the  Blank  Produce 
Co.  in  Kansas  for  a  car  of  lemons.  Opinion: 
In  the  absence  of  express  authority  conferred 
by  statute,  a  bank  has  no  power  to  guarantee 
to  pay  the  draft,  it  being  a  transaction  in 
which  it  has  no  interest  and  from  which  it 
derives  no  substantial  benefit  and  the  bank 
would  not  be  liable  upon  the  draft.  Vol.  6, 
p.  92,  Aug.,  1913. 

178.  (Fla.)  A  bill  of  lading  draft  w^as 
drawn  on  a  party  in  Mississippi  and  pay- 
ment was  guaranteed  by  a  Mississippi  bank. 
The  draft  was  marked  paid  and  the  bank 
claimed  to  have  fulfilled  its  guarantee,  but 
the  proceeds  were  afterwards  attached  by  the 
consignee.  Opinion:  The  draft  in  question 
was  a  bill  of  lading  draft  within  the  meaning 
of  the  Mississippi  statute,  which  requires  the 
collecting  bank  to  hold  the  proceeds  96  hours 
after  delivery  of  the  bill  of  lading  and  not 
an  ordinary  sight  draft  as  to  which  it  should 
have  remitted  immediately.  The  bank  which 
guaranteed  payment  fulfilled  its  guarantee, 
as  it  did  not  go  to  the  extent  of  insuring  that, 
after  payment,  the  proceeds  would  be  paid 
over  free  from  attachment;  but  it  is  the  pre- 


vailing theory  of  the  law  that  it  is  not  com- 
petent for  a  bank  to  bind  itself  by  such  a 
guarantee.     Vol.  2,  p.  72,  Aug.,  1909. 

179.  (N.  Y.)  A  bank  guaranteed  the  sig- 
nature to  an  assignment  of  a  stock  certificate 
by  using  the  words  "signature  guaranteed," 
duly  signed  by  a  qualified  officer.  The  ques- 
tion concerns  the  extent  of  lialjility  incurred 
by  a  guaranty  of  signature.  Opinion:  A.s- 
suming  a  case  where  the  bank  has  jjower  and 
the  officer  autliority  to  make  the  guaranty,  it 
binds  the  bank  for  the  genuineness  of  the  sig- 
nature as  well  as  for  the  authority  of  the 
person  signing  when  the  signature  is  made  by 
a  representative ;  but  does  not  extend  to  war- 
ranting the  validity  of  the  acts  of  the  per.son 
whose  signature  is  guaranteed  with  reference 
to  the  use  of  the  certificate.  Vol.  7,  p.  999, 
June,  1915.     See  517. 

180.  (Okla.)  A  gives  B  a  post-dated 
check.  B  writes  the  bank  in  regard  thereto 
and  the  cashier  mails  a  written  guarantee  to 
B  that  the  check  will  be  paid  when  due. 
Opinion:  The  cashier  by  virtue  of  his  office 
had  no  authority  to  bind  the  bank  by  guar- 
anteeing payment  of  the  check  before  its  due 
date  and  the  bank  is  not  bound.  Vol.  8, 
p.  322,  Oct.,  1915.    See  14. 

Indemnity  bond  covering  risk  of  unauthor- 
ized  indorsements 

181.  (Minn.)  A  bank  receives  a  large 
volume  of  checks  and  drafts  payable  to  cer- 
tain clients  of  an  attorney,  who  indorses  them 
for  deposit  in  his  personal  account.  x\  bond 
of  indemnity  will  secure  the  bank  against 
loss  by  reason  of  a  possible  unauthorized  in- 
dorsement by  the  attorney.  For  suggested 
form  of  bond  see  Vol.  5,  p.  445,  Jan.,  1913. 

Liability  of  person  identifying  payee 

182.  (Ariz.)  AHiere  A  orally  identified 
the  payee  of  a  check  to  the  purchasing  bank, 
A  is  not  liable  to  make  the  check  good  in  the 
event  of  non-payment,  provided  no  false  rep- 
resentations were  made  by  A  which  were  acted 
upon  by  the  bank  to  its  injury.  To  hold  the 
person  identifying  the  payee  liable  in  the 
event  of  dishonor  such  person  should  be  re- 
quired to  indorse  the  check.  Vol.  3,  p.  518, 
March,  1911.     See  615,  616,  636. 

Loan  to  bank  official  restricted 

183.  (N.  J.)  Opinion:  Section  12  of 
New  Jersey  Banking  Act  which  prohibits 
a  bank  from  making  a  loan  to  an  officer  or 
director  or  clerk  until  certain  requirements 


22 


BANKS  AND  BAXKIXG 


190 


arc  complied  with  might  be  construed  to 
apply  to  a  loan  to  an  executor,  trustee  or  re- 
ceiver who  is  an  officer  or  director  but  not  to 
a  loan  to  a  corporation  of  which  a  director  or 
officer  of  the  bank  was  an  officer  unless,  in 
reality,  the  officer  was  chief  beneficiary  of 
such  loan.     Vol.  6,  p.  375,  Nov.,  1913. 

Investigation  of  private  affairs  by  Con- 
gressional Committee 

184.  (Ky.)  The  Committee  on  Banking 
and  Currency  of  the  House  of  Representa- 
tives required  the  state  banks  and  trust  com- 
panies to  fill  out  certain  blanks  in  answer  to 
various  questions  concerning  the  private  af- 
fairs of  the  institution.  For  example,  the  in- 
vestigation called  for  a  list  of  the  officers, 
directors  and  stockholders,  their  stock- 
holdings and  loans,  description  of  securities 
hold,  the  dates  and  amounts  of  paper  in- 
dorsed for  others,  a  list  of  borrowers,  etc. 
Opinion:  Grave  doubt  as  to  jurisdiction 
of  House  of  Representatives  or  power  of  com- 
mittee to  investigate  private  affairs  of  state 
banks  and  trust  companies — questions  of  ju- 
risdiction considered  in  light  of  Federal  deci- 
sions and  4th  and  5th  Amendments — further 
question  as  to  invasion  of  state  rights — con- 
clusion that  general  inquiry  by  a  Congres- 
sional Committee  into  the  alfairs  of  all  banks 
of  a  state  is  probably  beyond  jurisdiction  of 
House  of  Representatives  to  authorize,  and 
tiiat  national  banks  are  not  subject  to  pro- 
posed investigation  in  view  of  provision  of 
National  Bank  Act  limiting  visitorial  powers. 
Vol.  4,  p.  745,  June,  1912. 

Bank's  right  to  pledge  assets 

185.  (Ohio.)  The  City  of  D  deposited 
with  an  Ohio  bank  $30,000.  The  bank  di- 
rectors signed  a  bond  to  the  city  and  to  secure 
themselves  deposited  $36,000  of  the  bank's 
assets  with  a  trustee.  Opinion:  In  the  ab- 
sence of  statutory  prohibition  there  is  no 
reason  of  public  jiolicy  or  otherwise  why  the 
bank  has  not  the  right  to  pledge  its  assets  to 
secure  the  sureties  on  the  bond.  Vol.  G,  p. 
99,  Aug.,  1913. 

Bank   as   safe   depositary 

186.  (Kan.)  A  bank  leased  a  safe  de- 
posit box  to  A,  who  holds  the  key.  His  part- 
nership business  with  B  having  failed,  a  re- 
ceiver was  appointed  and  A  moved  away. 
A's  wife  who  found  the  key  demands  the 
right  to  open  the  box.  Opinion:  A  bank 
which  leases  a  safe  deposit  box  to  a  customer 
who  keeps  the  key  is  a  bailee  for  hire  under 


duty  to  exercise  reasonable  care  and  should 
not  allow  a  person  other  than  the  customer 
presenting  the  key  access  to  such,  except  upon 
written  authority  from  the  customer,  whether 
such  person  be  the  bailee's  wife,  or  a  receiver 
of  the  bailee  or  any  other  person,  unless  com- 
pelled to  do  so  by  valid  judicial  process.  Vol. 
11,  p.  215,  Oct.,  1918.     See  472. 

Savings  bank  and  bank  prohibited  from 
transacting  business  in  same  room 

187.  (Ind.)  New  York  legislation  pro- 
hibits the  doing  of  business  in  the  same  room 
by  a  bank  and  a  savings  bank.  Massachu- 
setts legislation  includes  the  foregoing  and 
further  prohibits  officers  of  savings  bank 
from  being  officers  of  other  banks.  Vol.  3, 
p.  4G9,  Feb.,  1911. 

Use  of  word   "Savings"   by   commercial 
bank 

188.  (Ky.)  A  commercial  l)ank  in  Ken- 
tucky is  not  prohibited  by  statute  from  carry- 
ing savings  accounts  and  from  having  a  sav- 
ings department,  but  in  that  connection  it 
must  keep  separate  books  for  savings  business 
and  post  the  rate  of  interest  allowed  deposi- 
tors and  other  regulations  prescribed  by  the 
directors.  There  is  no  statute  in  Kentucky 
prohibiting  the  use  or  advertisement  of  the 
word  "savings"  by  a  commercial  bank.  Vol. 
9,  p.  826,  April,  1917.     See  S70. 

Due  diligence  in  examining  statement 

189.  (S.  Dak.)   It  is  the  duty  of  a  country 

bank  receiving  a  daily  statement  from  its  city 
correspondent  to  check  up  the  statement,  use 
due  diligence  in  examining  it  and  to  give  due 
notification  of  any  errors.  What  constitutes 
due  diligence  has  not  yet  been  specifically  de- 
fined by  the  courts.  In  the  ligiit  of  a  recent 
New  York  decision  in  the  Morgan  case  dis- 
cussing the  degree  of  diligence  required  by  a 
depositor,  uj)on  tiie  return  of  a  statement  of 
accounts  and  voucliers  to  a  depositor,  reason- 
able diligence  reciuires  a  very  prompt  exam- 
ination of  the  acrount  and  rejwrting  of  errors, 
failing  which  the  bank  will  not  be  chargeable 
in  the  event  subsequent  forged  checks  were 
])aid  which  would  not  have  been  paid  had  the 
depositor  exercised  due  diligence  in  the 
matter  of  prompt  examination  and  notifica- 
tion.    Vol.  7,  p.  381,  Dec,  1911. 

Liability  for  statement  of  customer's 
financial   condition 

190.  (Cal.)     Tiie     holder    of    a    check 
makes  inijuiry  of  drawee  over  the  telephone 


23 


191 


DIGEST  OF  LEGAL  OriNlOXS 


as  to  drawer's  account,  and  Ix'caiiso  of  defec- 
tive wire  the  inquiry  is  understood  to  refer  to 
a  diU'erent  ])crson  and  answer  is  made  that  the 
party  lias  no  account,  which  leads  to  apprc- 
liension  of  drawer  whose  cheek  is  good.  Opin- 
ion: The  drawee  is  not  liahlc  to  de])ositor  in 
action  for  slander,  nor  to  inquiring  bank,  in 
ease  the  latter  is  held  liable  in  damages  to  the 
drawer.     Vol.  9,  p.  498,  Dec,  191G. 

191.  (Iowa.)  A  collection  agency  which 
pulilislies  in  a  "delinquent  book''  tlie  names 
of  debtors  against  whom  it  hold  claims  for 
collection  Avould  be  subject  to  action  for  libel, 
and  a  bank  furnishing  to  such  agency  the 
names  of  certain  of  its  debtors,  with  author- 
ity and  intention,  if  the  debts  are  not  paid, 
that  such  names  be  so  published,  would  be 
likewise  responsible.  Vol.  9,  p.  499,  Dec, 
1910. 

192.  (Iowa.)  In  response  to  an  inquiry 
by  an  Iowa  bank  concerning  the  financial 
condition  of  its  customer,  a  Georgia  bank  by 


its  officer  returned  words  of  general  and 
j)ointed  praise  and  sjiecifically  stated  that  tlie 
customer  "is  worth  apj)ro.\imately  $'^0,000 
and  we  are  sure  a  note  for  $G00  on  him  is 
j)erfectly  good  and  collectible."  These  state- 
ments, which  proved  false,  were  relied  upon 
to  the  injury  of  the  Iowa  bank  in  extending 
credit  to  its  customer.  Opinion:  The 
Georgia  bank  was  not  liable  for  the  unauthor- 
ized act  of  its  officer,  unless  the  bank  derived 
some  benefit,  but  the  officer  is  personally 
liable  for  damages  in  an  action  for  deceit. 
The  authorities  generally  support  the  view 
that  the  making  of  statements  as  to  the  finan- 
cial responsibility  of  customers  is  no  part  of 
the  banking  business  and  that  a  bank  officer 
has  no  authority  to  make  such  statements  on 
behalf  of  tlie  bank  and  does  not  bind  the  bank 
thereby,  except  that  where  the  bank  has  pro- 
fited by  the  false  statement  it  will  be  held 
liable,  although  such  liability  has  been  denied 
in  some  cases.  For  a  review  of  the  law  ap- 
plicable to  the  recovery  of  damages  for  false 
statements,  see  Vol.  6,  p.  204,  Sept.,  1913. 


BANK  OFFICERS  AND  DIRECTORS 


President  of  national  bank  as  bond  broker 

193.  (Ore.)  A  national  bank  president 
acted  as  bond  broker  and  in  his  personal  ca- 
pacity sold  a  bond  to  B  and  at  the  same  time 
verbally  promised  B  that  the  bank  would 
take  up  the  bond  should  B  desire  to  cash  it.  B 
seeks  to  compel  the  bank  to  take  up  the  bond. 
Opinion:  A  national  bank  has  no  power  to  act 
as  broker  in  stocks  and  bonds,  and  its  presi- 
dent who  sells  bonds  in  a  personal  capacity 
has  no  authority  to  bind  bank  by  promise  that 
bank  will  take  up  bonds  thus  sold.  Vol.  4, 
p.  427,  Jan.,  1912. 

Bank  as  holder  of  director's  note 

194.  (N.  Dak.)  A  bank  purchased  a  note 
from  one  of  its  directors,  who  had  knowledge 
of  an  infirmity  which  would  ordinarily  render 
the  instrument  unenforceable.  Opinion: 
The  bank  was  an  innocent  purchaser  and  is 
not  chargeable  with  the  knowledge  possessed 
by  its  director.  The  director's  knowledge 
was  acquired  outside  his  official  duties  and 
was  not  attributable  to  the  bank.  Vol.  6, 
p.  92,  Aug.,  1913. 

Liability  of  bank  for  unauthorized  acts  of 
cashier 

See    14,    108,    169,    ISO 

195.  (S.  C.)  The  cashier  of  a  bank  al- 
lowed its  depositor  an  overdraft  of  $1,000. 
To  cover  this  amount  the  cashier  accepted  its 


depositor's  note,  which  was  indorsed  and 
guaranteed  by  A,  upon  the  cashier's  statement 
that  A  would  not  be  held  liable  to  the  bank 
upon  his  guaranty,  and  that  the  note  was 
only  temporary  to  cover  the  amount  during 
the  presence  of  the  bank  examiner.  Opinion: 
A  is  bomid  by  his  guaranty.  A  bank  cashier 
has  no  authority  by  virtue  of  his  office  to 
promise  an  indorser  on  a  note  to  the  bank  that 
he  will  not  be  liable  upon  his  indorsement. 
Vol.  3,  p.  586,  April,  1911. 

196.  (W.  Va.)  The  cashier  of  a  bank 
without  the  authority,  knowledge,  or  consent 
of  the  board  of  directors,  executed  a  bond  to 
indemnify  a  corporation  against  loss  in  issu- 
ing a  duplicate  certificate  of  stock.  The  cashier 
falsely  represented  that  the  original  certificate 
of  stock  had  been  held  by  the  bank  as  collat- 
eral and  had  been  lost,  but  in  fact,  such 
original  had  never  been  in  the  bank's  posses- 
sion. Opinion:  The  cashier  had  no  inherent 
power  to  execute  such  a  bond,  and  his  act 
being  without  actual  authority  and  not  with- 
in the  scope  of  his  implied  powers  did  not 
bind  the  bank.     Vol.  2,  p.  537,  June,  1910. 

Cashier  of  national  bank  need  not  be  a 
director 

197.  (Tex.)     The  cashier  of  a  national 

bank  need  not  but  may  be  a  director.  Vol.  7, 
p.  776,  April,  1915. 


24 


BAXK  OFFICERS  AXD  DIRECTORS 


207 


Duty  to  deface  counterfeit  money 

198.  (Iowa.)  The  Federal  law  requires 
United  States  and  national  bank  officers  to 
deface  counterfeit  notes,  but  makes  no  similar 
requirement  as  to  counterfeit  coins.  Some 
clearing  house  rules  require  defacement  of 
both  counterfeit  coins  and  notes  and  such 
would  seem  the  proper  procedure  for  all 
banks,  national  and  state.  Vol.  9,  p.  350, 
Oct.,  1916. 

Interlocking  directorates 

199.  (Minn.)  The  right  of  an  officer 
and  director  of  a  national  bank  with  re- 
sources exceeding  five  million  dollars,  located 
in  a  city  of  over  two  hundred  thousand  inhab- 
itants, to  be  an  officer  and  director  in  any 
number  of  non-member  state  banks,  elsewhere 
located  and  none  having  resources  equaling 
five  million  which  right  exists  under  the 
Clayton  Act,  is  not  restricted  by  the  provi- 
sions of  the  Kern  Act  which  are  cumulative 
and  additionally  permit  such  officer,  upon 
consent  of  the  Federal  Reserve  Board,  to  be 
in  not  more  than  two  other  banks  not  in  sub- 
stantial competition,  from  which,  but  for  the 
Kern  proviso,  he  would  be  excluded.  Vol. 
9,  p.  421,  Nov.,  1916. 

200.  (Minn.)  A  director  in  a  state  bank 
which  is  a  member  of  the  Federal  reserve 
system  in  a  city  of  over  200,000  population 
cannot  be  director  of  a  trust  company  and  of 
a  capitalized  savings  bank  located  in  the  same 
place.  The  director  of  a  state  member  bank 
cannot  also  be  a  director  in  a  national  bank 
in  said  place.     Vol.  8,  p.  908,  April,  1916. 

201.  (N.  Y.)  A  director  of  a  national 
bank  located  in  New  York  is  eligible  to  be- 
come trustee  of  a  savings  bank  in  the  same 
state,  provided  a  majority  of  the  board  of 
trustees  of  the  savings  bank  is  not  composed 
of  directors  of  the  national  bank.  Vol.  11, 
p.  435,  Feb.,  1919. 

Officer  as  attesting  witness 

202.  (Mo.)  An  officer,  not  a  stock- 
holder, of  the  ])ayeo  bank  is  coni])etent  to  sub- 
scribe to  the  mark  of  the  maker  of  an  instru- 
ment as  attesting  witness.  Where  the  officer 
is  a  stockholder  it  is  unwise  for  the  bank  to 
act  upon  the  assumption  of  such  competency. 
Vol.  2,  p.  22,  July,  1909. 


Overdraft  by  director 

203.  (N.  J.)  The  director  of  a  bank  in 
pursuance  of  liis  oral  order  received  from  the 
bank  certificates  of  deposit  which  were  in  ex- 
cess of  his  account.  A  Xew  Jersey  statute 
makes  it  criminal  for  a  director  to  overdraw 
his  account.  Opinion:  This  transaction  con- 
stituted a  violation  of  the  statute,  for  the 
director  made  an  oral  order  which  was  vir- 
tually a  draft  upon  his  account  in  excess  of 
his  credit  and  received  payment  in  the  bank's 
negotiai)le  certificates  of  deposit,  wliit-h  were 
the  equivalent  of  money.  Vol.  9,  p.  347, 
Oct.,  1910. 

Personal  liability 

See    ]'.)-2,    y.S.-j,    ,SS6 

204.  (Me.)  A  bank  officer  or  minor  offi- 
cial is  not  personally  liable  for  a  mistake  in 
])aying  a  raised  clieck  in  absence  of  gross  or 
inexcusable  neglect.  Vol.  1,  j).  333,  March, 
1909.    See  89. 

205.  (Miss.)  By  reason  of  the  neglect 
of  certain  directors  of  a  ^lississippi  l)ank  in 
holding  regular  examinations  of  the  bank,  the 
stockholders  suffer  a  loss.  The  directors  dis- 
claim liability  because  they  were  not  paid  for 
their  services.  Opinion:  The  fact  that  the 
bank  directors  received  no  comjiensation  did 
not  relieve  tliem  from  liabilitv  for  neglect  of 
duty.     Vol.  6,  p.  212,  Sept.,  1913. 

206.  (N.  Y.)  Bank  teller,  who  in  vio- 
lation of  instructions  not  to  pay  over  $100, 
])ays  check  raised  from  $5  to  $250  is  person- 
ally liable  to  the  bank.     Vol.  1,  p.  205,  Dec, 

1008. 


Power  to  borrow  money  for  use  of  bank 

207.  (Wash.)  it  is  n..w  well  settled 
that  the  executive  officers  of  national  banks 
may  legitimately  in  the  usual  course  of  bank- 
ing business,  and  without  special  authority 
from  their  board  of  directors,  rediscount  their 
own  discounts  or  otherwise  l)orrow  money  for 
the  bank's  use.  It  is  likely  that  such  officers 
would  have  like  autliority  to  bind  the  bank 
by  an  independent  blanket  guaranty  of  pay- 
ment covering  all  the  notes  transferred,  the 
notes  themselves  being  indorsed  witiiout  re- 
course.    Vol.  5.  p.  593,  March,  1913. 


25 


208] 


BANKRUPTCY  AND  INSOLVENCY 

Fur  Insolvency  of  Collecting  Bank,  see  Collection,  410- 11. j 
For  Set  Off,  sec  1177-12:50 


Certified  checkholder  not  a  preferred 
creditor 

208.  (Wis.)  The  holders  of  checks  cer- 
tified by  ;i  national  bank  which  becomes  in- 
solvent are  not  preferred  over  other  creditors; 
nor  does  the  Wisconsin  Banking  Law  give 
such  preference  to  the  holders  of  certified 
checks  of  insolvent  state  banks.  Vol.  4,  p. 
152,  June,  1912. 

Claim  to  dividends 

209.  (Tenn.)  A  corporation  pledged 
$10,000  worth  of  bonds  with  a  bank  to  secure 
a  loan  from  the  bank  of  $7,000  as  well  "as 
any  other  indebtedness."  Later  the  bank 
loaned  the  corporation  an  additional  $3,000 
to  be  paid  out  of  the  sale  of  its  product  in 
preparation.  Before  the  sale  the  corporation 
became  bankrupt,  and  the  bank  realized 
$7,000  from  the  bonds.  The  bank  claims 
the  unpaid  balance  against  the  estate.  Opin- 
ion: The  bank  is  entitled  to  dividends  on  the 
unpaid  balance,  over  and  above  the  amount 
realized  upon  the  security.  Vol.  1,  p.  266, 
Jan.,  1909. 

Depositaries  for  estates  in  bankruptcy 

210.  (N.  C.)  National  Bankruptcy  Law 
does  not  restrict  deposits  of  money  of  bank- 
rupt estates  to  national  banks  and  the  courts 
of  bankruptcy  may  designate,  by  order,  state 
banks  as  depositories.  Vol.  3,  p.  466,  Feb., 
1911. 

Discharge   as  bar  to   unlisted   claim 

211.  (Miss.)  A  bankrupt  owing  a 
bank  on  a  claim  intentionally  omitted  to  list 
the  bank  as  a  creditor  in  his  schedules,  be- 
cause he  intended  to  pay  the  claim.  He  ob- 
tained his  discharge  and  now  refuses  to  pay 
the  claim.  Opinion:  The  bank  can  recover 
the  full  amount  of  its  claim  against  the  bank- 
rupt, provided  it  had  no  notice  or  knowledge 
of  the  bankruptcy  proceedings  prior  to  the 
discharge.     Vol.  3,  p.  521,  March,  1911. 

Dividend   check  of  failed  national   bank 

212.  (Fla.)  A  bank  acquired  by  in- 
dorsement a  dividend  check  drawn  by  a  na- 
tional bank  payable  to  one  of  its  stockholders. 
Before  the  check  was  presented  the  national 
bank  failed,  and  the  receiver  takes  the  posi- 
tion that  the  claim  on  the  dividend  check 
must  be  made  by  the  original  stockholder- 


payee,  and  ]io  assignment  of  the  check  can 
be  recognized  because  such  stockholder  may 
be  liable  to  assessment  on  his  stock.  The  bank 
holding  the  check  seeks  to  file  a  proof  of  claim. 
Opinion:  The  indorsee  for  value  of  the  check, 
acquiring  the  same  before  the  failure  of  the 
bank,  has  a  right  to  prove  its  claim  thereon 
against  the  receiver  free  from  counterclaim 
by  the  receiver  against  the  original  payee  for 
assessment  on  stock.  The  position  taken  by 
the  receiver  ignores  the  fact  that  such  divi- 
dend check  is  a  negotiable  instrument.  If 
the  receiver  disallows  the  claim  the  bank's 
remedy  is  by  action  to  establish  claim  by 
judgment.     Vol.  10,  p.  310,  Oct.,  1917. 

Liens  within  four  months  of  bankruptcy 
See   218 

213.  (Idaho.)  A  bank  received  a  num- 
ber of  notes  as  collateral  upon  a  loan  due 
December  1,  1910.  The  notes  were  collected 
and  applied  on  the  indebtedness  on  January 
5,  1911.  The  borrower  became  a  bankrupt 
April  28,  1911.  Opinion:  The  assignment 
of  the  notes  as  collateral  more  than  four 
months  prior  to  the  bankruptcy  was  not  a 
preference,  although  the  notes  were  not  col- 
lected until  within  the  four  months.  Vol. 
4,  p.  220,  Oct.,  1911. 

214.  (N.  J.)  A  judgment  obtained  more 
than  four  months  prior  to  the  filing  of  a  pe- 
tition in  bankruptcy  is  a  valid  and  enforce- 
able lien  against  the  bankrupt's  estate,  but 
when  obtained  within  four  months,  it  is  void 
where  the  debtor  is  adjudged  bankrupt.  Vol. 
10,  p.  783,  May,  1918. 

Payment  of  check  on  insolvent  bank 

215.  (Kan.)  A  check  upon  A  bank  is 
caslied  by  B  bank  and  immediately  charged 
to  the  former's  account  prior  to  forwarding 
it  to  A  bank,  pursuant  to  an  agreement  be- 
tween both  banks.  A  bank  became  insolvent 
after  its  account  was  charged  but  before  it  re- 
ceived the  item.  Opinion:  Bank  B  will  not 
be  permitted  to  maintain  the  charge  to  the 
account  of  Bank  A,  against  the  receiver  of  the 
latter.     Vol.  7,  p.  899,  :May,  1915. 

Innocent   purchaser   of  negotiable   paper 
transferred  by  bankrupt 

216.  (111.)  A  bankrupt's  estate,  from 
the  date  of  filing  of  petition  against  him, 
being  in  custody  of  the  court,  the  bankrupt 


26 


BANK  STOCK  AND  STOCKHOLDERS 


222 


without  power  to  thereafter  transfer  same 
and  such  filing  being  notice  to  all  the  world 
that  the  bankrupt's  power  of  disposal  is  at  an 
end,  it  has  been  held  that  the  innocent  pur- 
chaser of  negotiable  paper,  transferred  by 
the  bankrupt  after  filing  of  the  petition  is 
not  a  bona  fide  holder,  but  is  charged  with 
constructive  notice.  But  this  rule  is  not 
firmly  established,  and  in  view  of  the  inequity 
and  impolicy  of  charging  innocent  purchasers 
of  negotiable  paper  with  constructive  notice 
in  such  cases,  it  is  fair  to  assume  that  future 
courts  will  create  an  exception  of  innocent 
purchasers  of  negotiable  paper  from  the  doc- 
trine of  constructive  notice  because  of  the 
filing  of  a  petition  in  bankruptcy  against  a 
prior  transferor,  as  has  already  been  done  in 
protection  of  a  bank  which  has  innocently 
paid  its  customer's  check  in  ignorance  of 
prior  filing  of  petition  in  bankruptcy  against 
such  customer.     Vol.  11,  p.  211,  Oct.,  1918. 

Preference   not  created  where  collateral 
renewed 

217.  (Ala.)  A  note  secured  by  a  real 
estate  mortgage  was  past  due,  although  part 
payment  had  been  made  by  a  sale  of  a  part  of 
the  mortgaged  premises.  The  mortgagee  de- 
sires a  new  note,  secured  not  only  by  a  new 
mortgage  on  the  premises  covered  by  tlie  old 
mortgage,  but  also  by  additional  new  security. 
In  case  of  the  mortgagor's  bankruptcy  with- 
in four  months  of  the  renewal  the  mort- 
gagee questions  the  right  of  the  creditors  to 
tlie  mortgaged  property.  Opinion:  Substi- 
tution of  new  mortgage  within  four  months 


on  same  property  covered  by  old  mortgage 
would  not  be  a  preference,  but  taking  of  ad- 
ditional security  would  be  a  preference  to 
extent  of  such  securitv.  Vol.  5,  p.  247,  Oct., 
1912. 

218.  (Okla.)  More  than  four  months 
prior  to  the  liankruptcy  of  a  firm  a  bank 
loaned  money  to  said  firm  on  pledge  of  col- 
lateral. Within  the  four  months  the  bank 
released  the  collateral  on  the  promise  of  the 
firm  to  substitute  farmers'  notes  later.  The 
farmers'  notes  were  afterwards  substituted 
for  most  of  the  loan  and  the  balance  was  paid 
by  check.  A  month  later  the  firm  was  forced 
into  bankruptcy,  but  the  bank  ha<l  had  no  rea- 
son to  believe  that  the  firm  was  not  entirely 
solvent.  The  question  was  raised  whether  the 
settlement  of  the  loan  by  the  firm  by  sub- 
stituted collateral  and  check  constituted  a 
preference.  Opinion:  While  a  substitution 
of  new  collateral  within  the  four  months  in 
exchange  for  collateral  of  equal  value  relin- 
quished at  the  same  time  would  not  be  a  pre- 
ference, it  is  doubtful  whether  it  would  be 
so  held  where  new  collateral  was  afterwards 
substituted  for  most  of  the  loan  pursuant  to 
a  prior  promise,  the  balance  l)eing  paid  bv 
check.     Vol.  4,  p.  220,  Oct.,  1911. 

Propery  inherited  after  adjudication 

219.  (N.  Y.)  Where  a  bankrupt  inherits 
property  after  the  adjudication  of  his  bank- 
ruptcy, the  creditors  have  no  claim  against 
such  after  acquired  propcrtv.  Vol.  4,  p.  557, 
March,  1912. 


BANK  STOCK  AND  STOCKHOLDERS 


Liability  of  transferor  to  assessment 

220.  (N.  Dak.)  A  sold  B  in  good  faith 
ten  shares  of  his  stock  in  a  national  bank. 
Within  one  year  after  the  sale  the  bank 
failed.  The  question  was  raised  whether  A 
was  subject  to  liability.  Opinion:  If  the 
transfer  was  made  in  good  faith  and  was 
properly  registered  on  the  books,  the  trans- 
feror was  not  liable  to  assessment  when  the 
bank  subsequently  failed,  even  thougli  the 
l)ank  was  insolvent  at  the  time  of  the  trans- 
fer.    Vol.  4,  p.  96,  Aug.,   1911. 

Dividends 
See  432,  433 

221.  (Neb.)  After  a  dividend  was  de- 
clared  and   became   payable,   the  stock  was 


transferred  to  a  liolder  without  any  agree- 
ment as  to  the  dividend.  Opinion :  The  divi- 
dend belongs  to  the  owner  of  the  stock  at  the 
time  it  was  declared  and  does  not  pass  with 
a  sul)sequent  transfer  of  the  stock  unless  by 
express  contract.     Vol.  5.  p.  2»s  July,  1912. 

Double  liability 
See  1206 

222.  (Miss.)  A  became  the  owner  of 
certain  fully  ]>aiil  non-assessable  stock  issued 
by  a  Mississip{)i  bank  at  a  time  when  the  law 
provided  for  no  double  liability  of  stork- 
holders.  Under  the  Mississippi  Banking 
Act  of  March,  1914,  .V  has  been  assessed 
equal  to  the  par  value  of  his  stock.  Opinion: 
A's  stock  is  subject  to  the  assessment.  Al- 
though the  law  under  which  the  bank  was  or- 


27 


223 


DIGEST  OF  TJOriAL  OPIN'IOXS 


gaiiized  provides  no  double  liiil)ility  of  stock- 
holders, the  k'^nslature  may  amend  the  law 
and  create  such  liability  where  the  state  con- 
stitution, as  in  i\Iississipi)i,  reserves  power  to 
the  legislature  to  amend  the  law  of  incor- 
poration.    Vol.  9,  p.  145,  Aug.,  I'JIG. 

223.  (N.  J.)  Section  23  of  the  Federal 
lieserve  Act  provides  in  part:  "The  stock- 
holders of  every  national  banking  association 
shall  be  held  individually  responsible  for  all 
contracts,  debts  and  engagements  of  such 
association,  each  to  the  amount  of  his  stock 
therein,  at  the  par  value  thereof  in  addition 
to  the  amount  invested  in  such  stock."  The 
question  is  raised  as  to  the  meaning  of  the 
underscored  ])hrase;  whether  it  means  the 
price  that  is  paid  for  the  stock  in  the  open 
market.  Opinion:  In  event  of  failure,  stock- 
holder loses  the  amount  invested  in  the  stock 
and  in  addition  is  liable  for  debts,  pro  rata 
with  other  stockholders,  up  to  the  amount 
of  the  par  value  of  his  stock.  If  the  stock- 
holder has  bought  stock  in  an  open  market 
above  par  and  thereafter  the  national  bank 
goes  into  the  hands  of  a  receiver,  he  loses  the 
amount  invested  in  such  stock,  namely,  the 
market  price  paid  for  it,  and  is  also  liable  to 
assessment  to  the  extent  of  the  amount  of  his 
stock  at  the  par  value  thereof.  Vol.  11,  p. 
402,  March,  1919. 

224.  (Utah.)  A  national  bank  held 
stock  of  the  B  national  bank  as  security  for 
a  loan  and  bid  in  the  stock,  having  it  trans- 
ferred to  its  own  name  upon  the  books  of  the 
B  bank.  Thereafter  B  bank  failed  and 
A  bank  is  charged  with  payment  of  the  stat- 
utory assessment  of  100  ])er  cent.  Opinion: 
The  A  bank  is  liable  for  the  assessment.  The 
fact  that  it  became  owner  of  the  stock  by 
necessity  and  not  by  choice  would  not  change 
the  result.     Vol.  11,  p.  438,  Feb.,  1919. 

Increase  of  national  bank  stock 

225.  (Del.)  Where  stock  of  national 
bank  is  increased  by  the  vote  of  necessary 
number  of  shareholders,  and  resolution 
authorizing  increase  fixes  premium  at  which 
new  stock  shall  be  sold.  Opinion:  The 
stockholder  not  participating  or  voting  for 
increase  has  right  to  purchase  his  proportion 
of  new  shares  at  par.  Vol.  5,  p.  754,  May, 
1913. 

Inspection  of  books  and  records 

See  164  ct  scj 

226.  (Pa.)  A  stockholder  in  a  national 
bank  is  entitled  to  inspect  the  books  of  the 
corporation.     In  some  states  this  right  is  ab- 


solute, while  in  other  states  such  as  Pennsyl- 
vania the  law  conditions  the  enforcement  of 
the  right  upon  the  proper  motive  of  the  stock- 
holder.    Vol.  7,  ]).  090,  March,  1915. 

227.  (Pa.)  Opinion  expressed  that  a 
depositor  as  distinguished  from  a  stockholder 
has  no  such  interest  in  the  Ijank  as  would 
give  him  the  right  to  inspect  its  books  and 
records.  The  contrary  statement  in  two 
early  cases  that  on  all  proper  occasions  a  de- 
])ositor  has  a  right  to  inspect  the  books  of 
the  bank  is  a  mere  expression  of  opinion,  not 
having  the  force  of  law.  If  any  right  of  in- 
spection exists  in  the  depositor,  it  would  at 
most  be  confined  to  his  particular  account 
and  could  not  extend  to  the  accounts  of  other 
customers  or  to  the  general  business  of  the 
institution.     Vol.  7,  p.  578,  Feb.,  1915. 

Lien  for  stockholder's  indebtedness 

228.  (Ark.)  The  stockholder  of  an  Ar- 
kansas bank  owed  his  bank  on  an  overdraft 
but  had  transferred  to  another  his  stock, 
upon  which  the  bank  claimed  a  statutory  lien. 
After  the  stockholder  died  the  bank  trans- 
ferred the  stock  to  the  purchaser  but  applied 
part  of  the  dividends  to  payment  of  the  over- 
draft and  paid  the  balance  of  the  dividends  to 
the  decedent's  administrator.  Opinion:  By 
statute  in  Arkansas,  a  bank  has  a  lien  on  the 
stock  and  dividends  of  its  stockholder  for  an 
indebtedness  to  the  bank,  superior  to  the 
claim  of  the  transferee.  The  transferee, 
however,  can  recover  from  the  bank  the  bal- 
ance of  dividends  paid  to  the  administrator 
in  view  of  the  due  notice  to  the  bank  of  the 
transfer  of  the  stock.  Vol.  5,  p.  597,  March, 
1913.     See  237,  238. 

229.  (Kan.)  The  Kansas  Banking 
Law  protects  a  bank  against  a  transfer  of 
bank  stock  so  long  as  the  registered  holder  is 
indebted  to  the  bank,  and  provides  that  all 
dividends,  interest  or  profit  shall  be  retained 
by  the  bank  and  applied  to  the  debt.  The 
bank  cannot  sell  the  stock,  unless  authorized 
bv  a  court  order  granted  in  a  proper  case. 
Vol.  5,  p.  518,  Feb^,  1913. 

230.  (Md.)  The  stockholder  of  a  na- 
tional bank  owed  the  bank  on  several  notes 
which  matured  after  his  death.  The  bank 
questions  its  right  to  claim  a  lien  on  its  stock 
for  the  indebtedness  or  to  refuse  to  transfer 
its  stock  to  another  upon  the  sale  by  the  ex- 
ecutor. Opinion:  The  national  bank  has  no 
lien  and  cannot  refuse  to  transfer  the  stock 
should  the  executor  see  fit  to  sell  it  to  an- 
other.    Vol.  6,  p.  100,  Aug.,  1913. 


28 


BANK  STOCK  AND  STOCKHOLDERS 


[239 


231.  (Mich.)  A  national  bank  has  no 
lien  on  its  stock  for  the  indebtedness  of  its 
stockholder.  Where  such  stock  is  in  the 
hands  of  a  pledgee  as  security  for  a  loan  it  is 
not  subject  to  any  claim  of  lien  by  the  issuing 
bank.     Vol.  7,  p.  306,  Nov.,  1914. 

232.  (Mo.)  A  stockholder  of  a  national 
bank  borrows  money  of  the  bank  without  se- 
curity. When  the  note  falls  due,  he  fails  to 
pay  it.  The  bank  asserts  a  lien  on  his  stock 
for  the  indebtedness.  Opinion:  A  national 
bank  has  no  lien  on  its  stock  for  the  indebt- 
edness of  a  stockholder  and  cannot  refuse  to 
transfer  his  stock  until  the  debt  is  paid.  But 
it  would  seem  that  the  national  bank  act 
would  not  prevent  the  bank  attaching  the 
shares  for  his  indebtedness,  where  in  posses- 
sion of  the  stockholder  at  the  time  of  the  at- 
tachment.    Vol.  3,  p.  401,  Jan.,  1911. 

233.  (Ohio.)  By  statute  in  Ohio,  a  bank 
has  a  lien  on  the  stock  owned  by  its  debtors 
and  may  refuse  to  transfer  the  same  mitil 
the  indebtedness  is  satisfied.  For  Ohio  de- 
cisions cited  see  Vol.  5,  p.  753,  May,  1913. 

234.  (N.  Y.)  The  stockholder  of  a  state 
bank  in  New  York  pledged  his  stock  to  a  na- 
tional bank  as  collateral  for  a  loan.  The 
stockholder  was  indebted  to  his  own  bank. 
The  national  bank  claimed  the  right  to  sell 
the  stock  to  secure  themselves,  while  the  state 
bank  claimed  a  prior  lien  on  the  stock  pur- 
suant to  a  provision  of  its  by-law  giving  it  a 
secret  lien.  Opinion:  The  state  bank  has  no 
lien  on  its  stock  and  cannot  refuse  to  transfer 
it.  Section  51  of  the  Stock  Corporation 
Law  of  New  York  gives  a  bank  or  other  cor- 
poration a  lien  on  its  stock  or  right  to  refuse 
to  transfer  while  the  stockholder  is  in- 
debted to  the  bank,  provided  a  copy  of  the 
section  is  printed  on  the  certificate — where 
not  so  printed,  a  lien  for  indebtedness  created 
by  the  by-law  is  not  effectual  against  a  pur- 
chaser of  the  stock  for  value  without  notice. 
Vol.  6,  p.  370,  Nov.,  1913. 

235.  (N.  Y.)  A  bank  holds  its  stock- 
holder's note  of  $1,000.  He  has  not  paid  his 
indebtedness  and  claims  he  has  sold  his  cer- 
tificate of  stock  to  a  third  person.  The  bank 
refused  to  transfer  the  stock  until  the  note 
was  paid.  The  certificate  contains  no  pro- 
vision claiming  a  lien  for  the  indebtedness  of 
the  stockholder.  Opinion:  Whore  stock- 
holder indebted  to  state  liank  in  New  York 
has  assigned  his  stock,  bank  may  refuse  trans- 
fer to  assignee  until  stockholder's  indebted- 
ness is  paid,  provided  section  of  statute  de- 


claring lien  is  printed  on  certificate;  other- 
wise not.     Vol.  10,  p.  530,  Jan.,  1918. 

236.  (Pa.)  A  borrower  pledged  as  col- 
lateral for  a  loan  the  stock  of  a  national  and 
of  a  state  bank.  The  stockholder  is  indebted 
to  the  banks  which  claim  a  prior  lien.  Opin- 
ion: A  national  bank  has  no  lien  on  the  stock 
for  the  indebtedness  of  its  stockholder,  and  in 
Pennsylvania  there  is  a  statutory  prohibition 
(Act  of  1901)  of  a  lien  by  state  banks.  The 
Uniform  Stock  Transfer  Act  passed  in  Penn- 
sylvania in  1911  provides  that  no  corporation 
shall  have  a  lien  upon  its  shares  or  restrict 
their  transfer  unless  notice  is  imprinted  on 
the  certificate.  It  is  doubtful  if  this  would 
be  construed  as  repealing  the  Act  of  1901 
prohibiting  banks  from  acquiring  liens  upon 
their  stock.     Vol.  8.  p.  14G,  Aug.,  1915. 

Right  to  dividends  on  pledged  stock 
See  228 

237.  (Ga.)  A  loaned  B  $1,000  on  50 
shares  of  the  capital  stock  of  X  Company, 
due  notice  of  the  pledge  having  been  given  to 
the  company.  Dividends  have  accrued  on  the 
stock  and  are  due  and  payable.  Opinion: 
Dividends  accruing  on  the  pledged  stock  be- 
long to  the  pledgee,  and  the  company  after 
notice  is  liable  to  the  pledgee  therefor.  If 
the  company  went  into  liquidation,  A  would 
be  entitled  to  liquidation  dividends.  Vol.  5, 
p.  6G7,  April,  1913. 

238.  (W.  Va.)  A  bank  held  as  collater- 
al certain  stocks  of  a  company  indebted  to 
the  bank,  upon  which  a  dividend  was  de- 
clared. After  the  dividend  was  due  and  be- 
fore received  by  the  bank,  the  funds  of  the 
pledgor  with  the  company  were  attached  by 
one  of  his  creditors.  Opinion:  The  bank 
had  the  right  as  unrecorded  pledgee  of  the 
stock  to  the  dividends  declared  thereon,  as 
against  an  attaching  creditor  of  the  pledgor. 
Vol.  5,  p.  520,  Feb.,  1913. 

Stock  issued  in  name  of  partnership 

239.  (N.  J.)  Jolni  Smith  and  Son,  a 
partncrshiji,  have  l)Ought  bank  stock  and  re- 
quest that  the  certificate  be  issued  under  the 
firm  name.  The  bank  is  uncertain  as  to 
whetber  one  of  the  firm  under  such  issue 
could  qualify  to  act  as  a  director  of  the  bank. 
Opinion:  A  certificate  of  bank  stock  may  be 
issued  to  a  firm  in  the  firm  name  and  a  di- 
rector's qualification  shares  may  be  held  by 
tlie  partnership  of  which  he  is  a  member. 
Where  a  certificate  of  stock  is  issued  in  the 
name  of  a  partnership,  a  valid  transfer  there- 


29 


240] 


DIGEST  OF  LEGAL  OPINIONS 


of  may  1)0  cxocutocl  by  any  nionibor  of  tlie 
firm  who  is  authorized  to  8ip:n  tlie  firm  name. 
Vol.   10.   ]K  TIC,  April,   1!H8. 

Transfer  of  stock 

Rc<>  220,  Li.it!,  KiM,    KH,  i:i:t!)  ct  scq 

240.  (Ga.)  A,  tlic  owner  of  a  ctTiificatc 
of  stock  in  a  Georgia  bank,  pledged  tlie  same 
as  security  for  a  loan  from  B,  who  held  his 
note  for  the  amount.  Afterwards  the  pledg- 
or obtained  a  new  certificate  of  stock  from  the 
bank  without  returning  the  original  certifi- 
cate. A  defaults  on  his  note  and  B  tenders 
the  original  certificate  to  tlie  bank,  requesting 
the  issue  of  a  new  certificate  of  stock.  The 
bank  refused  on  the  ground  that  another  cer- 
tificate had  been  issued  to  the  original  stock- 
holder. Oinnion:  In  issuing  a  new  certifi- 
cate without  surrender  of  the  original,  the 
bank  took  the  risk  of  the  original  certificate 
being  outstanding  in  the  hands  of  a  bona  fide 
holder.  The  pledgee  is  entitled  to  damages 
against  the  bank  for  such  refusal,  being  the 
amount  of  his  loan  and  interest  unless  he  has 
bought  the  stock  in,  in  which  case  the  meas- 
ure of  damages  is  the  value  of  the  stock  at 
the  time  of  refusal  to  transfer.  Vol.  11, 
p.  393,  Jan.,  1919. 

24L  (Va.)  A  Virginia  bank  purchased 
at  a  private  sale  ten  shares  of  stock  of  an  Ar- 
kansas bank  which  it  had  held  as  security 
for  a  loan  to  a  stockholder  of  the  latter  bank. 


The  Arkansas  bank  refused  to  transfer  the 
stock  thus  sold,  claiming  that  under  the  Ar- 
kansas statute  the  pledged  stock  was  not 
registered  in  the  county  clerk's  office  as  re- 
(juired  by  law.  Opinion:  Notwithstanding 
])rovisions  of  Arkansas  statutes  that  upon 
transfer  of  stock  a  certificate  of  transfer  must 
be  deposited  w'ith  county  clerk,  it  has  been 
decided  that  a  pledge  of  stock  is  valid  without 
such  deposit  and  the  statute  is  only  applicable 
to  transfers  by  the  stockholder  bv  way  of  sale. 
Vol.  6,  p.  213,  Sept.,  1!n  .3. 

Voting 
See  225,  439,  440 

242.  (Iowa.)  The  pledgor  of  certain 
stock  in  a  national  bank  became  bankrupt. 
The  trustee  in  bankruptcy  claimed  the  right 
to  vote  the  stock  at  the  stockholders  meeting. 
Opinion:  The  trustee  had  the  right  to  vote 
the  stock  in  the  hands  of  the  pledgee  of  the 
bankrupt,  where  the  stock  had  not  been  trans- 
ferred to  the  pledgee  on  the  books  of  the 
bank.     Vol.  5,  p.  378,  Dec,  1912. 

243.  (N.  Y.)  It  is  a  general  rule  of  law 
that  an  executor  has  the  right  to  vote  with 
respect  to  the  stock  standing  on  the  corpor- 
ate books  in  the  name  of  the  testator  on  ex- 
hibiting an  exemplified  copy  of  his  letters 
testamentary.  There  is  nothing  in  the  na- 
tional bank  act  which  restricts  this  right  with 
respect  to  stock  in  a  national  bank.  Vol.  7, 
p.  996,  June,  1915. 


BILLS  OF  LADING 

For  Attachment  of  Proceeds  of  B/L  Draft,  see  136  et  seq;  for  Collection  of  B,^L  Draft,  see 

367  et  seq 


Acceptor's  liability  on  b  /I  draft 

244.  (Miss.)  The  drawee  of  a  draft 
with  an  attached  bill  of  lading  representing 
cotton  accepted  the  draft  before  checking  the 
invoice.  Before  the  expiration  of  the  three 
days  of  grace,  the  drawee  discovered  an  error 
in  the  invoice  and  refused  payment  of  the 
draft  at  maturity,  whereupon  the  instrument 
was  protested.  Opinion:  Under  the  Missis- 
sippi law  (the  Anti-Commercial  statute)  the 
acceptor  of. the  draft  is  not  liable  to  a  bona 
fide  holder  where  it  has  a  good  defense 
against  the  drawer.  Vol.  4,  p.  613,  April, 
1912. 

Note:  Under  tlie  Negotiable  Instruments  Act, 
which  became  a  law  in  Mississippi  in  1916,  the 
acceptor  would  be  liable. 


Recovery  by  drawee  of  money  paid  on 
non-negotiable  b  1  draft 

245.  (Mich.)  A  draft  was  drawn  pay- 
able "on  arrival"'  and  provided  that  the  "paid 
freight  bill  will  be  accepted  as  part  payment." 
The  drawer  cashed  the  draft  with  the  bill  of 
lading  attached  at  the  bank,  which  forwarded 
the  instrument  for  collection.  The  drawee 
paid  the  draft  upon  surrender  of  the  bill  of 
lading,  but  afterwards  repudiated  the  trans- 
action and  recovered  the  money  from  the  col- 
lecting bank,  claiming  that  the  goods  were 
bought  on  sample  from  the  drawer  and  were 
not  as  represented.  Opinion:  The  draft  not 
being  an  unconditional  order  to  pay  money 
was  not  negotiable  and  the  bank  which  pur- 
chased the  draft  was  liable  to  refund  where  it 


30 


BILLS  OF  LADING 


253 


was  shown  that  there  was  failure  of  consider- 
ation for  the  draft.  Vol.  5,  p.  519,  Feb., 
1913. 

Rights  of  attaching  creditor  of  shipper 

See   13G  et  scq 

246.  (Cal.)  A  bank  discounted  and  be- 
came owner  of  a  draft  with  an  attached  order 
bill  of  lading  representing  prunes.  The 
draft  was  paid  by  the  consignee  of  the  goods, 
but  wliile  the  funds  were  in  the  hands  of  the 
collecting  bank  they  were  attached  by  a  cred- 
itor of  the  shipper.  Opinion:  The  purchas- 
ing bank  has  a  right  to  the  proceeds  in  the 
hands  of  the  collecting  bank  superior  to  that 
of  the  attaching  creditor.  Vol.  4,  p.  614, 
April,  1912. 

247.  (Me.)  Where  goods,  shipped  under 
an  order  bill  of  lading,  are  attached  by  a 
creditor  of  the  shipper,  the  courts  quite  gen- 
erally hold  that  a  bank  to  whom  the  bill  has 
been  pledged  for  value  as  security  for  ad- 
vances has  a  right  to  the  property  superior 
to  that  of  an  attaching  creditor.  Vol.  1, 
p.  203,  Dec,  1908. 

248.  (N.  Y.)  A  bank  discounted  a 
shipper's  draft  with  an  accompanying  bill  of 
lading  representing  hay,  and  credited  the 
shipper  with  the  amount.  The  drawee  re- 
fused to  pay  the  draft  and  attached  the  goods 
because  of  an  alleged  prior  indebtedness  of 
the  shipper  to  him.  Opinion:  The  bank  was 
not  simply  collecting  agent  of  the  shipper  but 
acquired  special  title  to  the  hay  superior  to 
that  of  an  attaching  creditor  of  the  shipper, 
even  though  the  credit  was  not  checked  out. 
Vol.  3,  p.  11,  July,  1910. 

249.  (N.  Y.)  It  is  the  undoubted  rule 
of  law  that  where  a  bank  purchases  or  makes 
advances  upon  a  draft,  to  which  is  attached 
a  bill  of  lading  as  security,  the  purchasing 
bank  takes  a  right  to  the  property  su])eri()r 
to  that  of  an  attaching  creditor.  Vol.  3,  p. 
11,  July,  1910. 

Bank's  liability  for  violation  of 
instructions 

250.  (La.)  A  bank  held  a  bill  of  lading 
to  be  delivered  to  the  consignee  after  he  had 
signed  an  attached  agreement  to  buy  a  soda 
fountain.  In  violation  of  instructions  from 
its  principal,  the  bank  as  agent  delivered  the 
bill  of  lading  without  procuring  the  signature 
to  the  agreement.  Opinion:  The  bank  was 
liable  to  its  principal  for  the  damages  suffered 
by  reason  of  the  violation  of  instructions,  but 
if  the  principal  was  not  rightfully  entitled 


to  have  the  agreement  signed  as  a  condition 
of  delivery  of  the  bill  of  lading  and  the  im- 
posing of  such  condition  was  wrongful  or 
fraudulent,  the  loss  of  opportunity  on  the 
part  of  the  principal  to  drive  an  unconscion- 
able bargain  would  not  be  legitimate  actual 
damage  recoverable  from  the  agent  bank. 
A^ol.  5,  p.  101,  Aug.,  1912.    See  3G8. 

Liability  for  issuing  bill  of  lading  without 
receipt  of  goods 

251.  (111.)  A  bank  purchased  and  col- 
lected of  the  drawee  a  bill  of  lading  draft, 
given  for  goods  to  be  shipped  on  the  Wabash 
railroad.  The  goods  were  never  delivered 
to  the  railroad  and  the  consignors  failed. 
The  drawee  sued  the  purchasing  bank  for 
money  paid  under  a  mistake  of  fact.  Opin- 
ion: The  purchasing  bank  was  not  liable  to 
the  drawee  as  warrantor  of  the  accompany- 
ing bill  of  lading;  but  the  drawee's  remedy, 
if  any,  was  against  the  railroad  for  issuing 
an  accommodation  bill  of  lading  without  the 
receipt  of  the  goods.  Vol.  2,  p.  3 To,  March, 
1910. 

Consignor  cannot  change  routing 

252.  (N.  Y.)  The  consignor  of  goods 
having  transferred  an  order  bill  of  lading  as 
security  to  a  bank,  has  no  right  without  the 
bank's  consent  to  have  the  shipment  di- 
verted en  route,  and  it'  the  railroad  obeys  his 
instructions  it  would  be  liable  in  damages  to 
the  bank.  In  the  case  of  a  shipment  from 
California  to  New  York,  if  the  bank  sued 
the  railroad  for  damages  in  converting  and 
injuring  the  property,  the  law  of  the  state 
where  the  injury  occurred  would  govern ;  but 
if  the  bank  sued  the  railroad  for  breach  of 
contract,  the  law  of  the  state  where  the  con- 
tract was  made  would  govern.  Vol.  3,  p. 
335,  Dec,  1910. 

Shipper's  indorsement  supplied  by  collect- 
ing bank 

253.  (Ala.)  The  shipper's  indorsement 
on  an  "urder  notify''  bill  of  lading  was  sup- 
plied by  a  collecting  bank  in  order  to  facili- 
tate the  payment  of  the  attached  draft  and 
the  delivery  of  the  goods  to  the  consignee. 
Opinion:  The  collecting  bank  would  incur 
no  resjionsibility  in  supplying  the  indorse- 
ment where  the  transaction  was  bona  fide 
and  the  bill  of  lading  represented  the  actual 
goods,  but  might  incur  responsibility  in  the 
event  of  a  forged  or  false  bill  of  lading.  Vol. 
5,  p.  313,  Nov.,  1912. 


31 


254 


DIGEST  OF  LEGAi.  OPINIONS 


Effect  of  absence  of  shipper's  signature 

254.  (N.  J.)  'I'lic  ro(|iiiR'nu'iit  of  the 
siffiiatui'c  (if  tlu"  sliii)i)('r,  wlicre  a  l)lank  is 
provided  on  the  uniionn  bills,  is  not  a  re- 
(luircnuMit  of  law  but  a  rcconmiondation  of 
the  Iiitorslato  Commerce  Commission.  It  is 
a  matter  of  practice,  not  of  law,  and  the  ab- 
sence of  tiie  shipper's  signature  does  not  ren- 
der the  document  invalid.  Vol.  2,  p.  37G, 
March,  1910. 

Uniform  Bill  of  Lading  Act  relative  to 
purchase  and  collection 

255.  (N.  Y.)  Tender  Sections  37  and  39 
of  the  Pomcrene  bill  (embodying  the  main 
features  of  the  Uniform  Bills  of  Lading  Act), 
which  has  passed  the  United  States  Senate 
and  is  pending  in  the  House 

1.  Where  a  bank  purchases  a  draft  witli 
an  order  bill  of  lading  attached  and  assigns 
it  with  indorsement  to  a  European  bank  for 
value,  the  bank  guarantees  the  genuineness 
of  the  bill  to  the  purchaser  but 

2.  Where  a  bank  forwards  the  draft  with 
the  attached  bill  of  lading  for  collection  from 
the  drawee,  the  bank  does  not  warrant  the 
genuineness  of  the  bill  of  lading  to  the  payor. 
Vol.  5,  p.  246,  Nov.,  1912. 

Note:  The  above  bill  became  a  law  August  29, 
1916,  and  took  effect  January  1,  1917.  In  the  law 
as  passed  the  sections  above  referred  to  are 
numbered  .34  and  36  respectively. 

Rights  of  payor  of  draft  where  goods  not 

according  to  contract 

See  252 

256.  (Minn.)  A  bank  purchased  a  num- 
ber of  drafts  covering  cars  of  hay  with  order 
bills  of  lading  attached  and  forwarded  the 
same  to  another  bank  for  collection.  The 
drawee  paid  the  drafts  but  later  attached  the 
funds  in  the  hands  of  the  collecting  bank,  be- 
cause the  goods  were  not  according  to  the 
contract.  Opinion:  The  purchasing  bank 
had  a  right  to  the  proceeds  in  the  hands  of 
the  collecting  bank  as  against  the  drawee. 
Vol.  5,  p.  518,  Feb.,  1913. 

257.  (Colo.)  A  bank  received  payment 
of  a  draft  with  bill  of  lading  attacTied  for 
consignment  of  goods,  in  payment  of  pur- 
chase price.  It  later  develops  that  the  goods 
were  not  according  to  contract  and  the  ques- 
tion is  raised  as  to  whether  the  receiving  bank 
is  liable  as  an  agent  of  the  seller  guaranteeing 
performance  of  the  contract,  unless  it  dis- 
claims such  warrantor  liability  by  indorse- 
ment on  the  bill  of  lading.     Opinion:  The 


almost  universal  judicial  rule  in  this  country, 
now  enacted  in  statutory  form  as  to  inter- 
state bills  by  Section  3(>  of  the  Federal  Bill 
of  Lading  Act  is  that  a  bank  which  purchases 
a  draft  witii  bill  of  lading  attached  is  not  re- 
sponsible to  the  drawee  who  pays  the  draft 
for  the  genuineness  of  the  bill  or  the  quan- 
tity or  quality  of  the  goods  therein  described. 
There  is  no  necessity  of  stamping  on  the 
draft  an  express  disclaimer  of  such  warrantor 
lial)ility  except  ])ossibly  in  the  case  of  intra- 
state bills  of  lading  in  Mississippi.  Vol.  11, 
p.  278,  Nov.,  191S. 

258.  (Ga.)  A  purchasing  bank  placed  a 
rubber  stamp  indorsement  on  a  draft  with  a 
bill  of  lading  attached,  whereby  it  dis- 
claimed liability  as  warrantor  of  the  quan- 
tity, quality,  and  delivery  of  the  goods 
affected.  The  bank  questions  the  effect  of 
such  disclaimer.  Opinion:  Xo  decision  by  a 
court  of  last  resort  has  been  rendered  testing 
the  effect  of  such  disclaimer.  It  is  almost 
the  universal  rule  that  the  bank  does  not 
incur  this  warrantor  liability  and  it  would 
probably  be  held  that  the  written  disclaimer 
would  be  surplusage  and  would  not  give  a 
bank  any  more  protection  than  it  already 
had.     Vol.  1,  p.  142,  Oct.,  1908. 

259.  (Mich.)  A  bank  indorses  a  draft 
with  a  bill  of  lading  attached,  using  its 
rubber  stamp  as  follows:  "By  indorsing  this 
draft  or  receiving  a  payment  thereon  we  do 
not  warrant  the  genuineness  of  the  bill  of 
lading  attached,  nor  the  quantity  or  quality 
of  the  goods  therein. 

Bank 

Michigan." 

The  bank  asks  whether  this  disclaimer  of 
warrantor  liability  invalidates  its  title  to  the 
goods  covered  by  the  bill  of  lading.  Opin- 
ion: Bank  which  purchases  and  collects  draft 
to  which  bill  of  lading  is  attached  as  security 
holds  a  special  title  to  the  goods  as  pledgee 
which  is  divested  upon  payment  of  the  draft, 
but  does  not  warrant  the  quantity  or  qual- 
ity of  the  goods  therein  described.  A  dis- 
claimer of  such  warrantor  liability,  stamped 
upon  a  bill  of  lading  draft  is  unnecessary, 
except  probably  in  case  of  drafts  drawn  on 
Mississippi,  where  the  warrantor  doctrine 
still  prevails;  but  if  such  disclaimer  stamp  is 
indorsed  upon  the  draft,  opinion  expressed 
that  it  would  not  weaken  the  bank's  special 
title  in  the  security.  Vol.  10,  p.  713,  April, 
1918. 

260.  (Ohio.)  It  is  almost  universally 
held  that  a  bank  which  purchases  a  draft 
with  a  bill  of  lading  attached  does  not  war- 


32 


BRAXCH  BANKS 


268 


rant  to  the  drawee  who  pays  the  draft  the 
quantity  and  quality  of  the  goods.  An  e;s- 
press  disclaimer  by  the  bank  of  such  liability, 
where  it  is  thought  necessary  to  guard  against 


a  possible  liability,  should  be  placed  on  the 
draft  rather  than  on  the  bill  of  lading  and 
such  stipulation  would  probably  be  binding 
on  the  drawee.     Vol.  3,  p.  277,  Nov.,  1910. 


BRANCH  BANKS 


Presentment  and  payment  of  checks 

261.  (Ala.)  The  drawer  of  a  check  on 
his  deposit  in  a  brancli  bank  can  stop  pay- 
ment thereof  after  the  check  has  been  pur- 
chased by  the  parent  bank  but  before  it  has 
been  presented  at  the  branch  bank,  and  the 
parent  bank  is  not  a  payor  of  the  check  but 
a  holder  in  due  course,  entitled  to  enforce 
payment  against  the  drawer  and  prior  in- 
dorsers.     Vol.  9,  p.  905,  May,  1917. 

262.  (Ga.)  In  the  city  of  C,  there  is 
the  "Bank  of  C"  and  also  a  branch  located  in 
a  different  part  of  the  cit}^  known  as  the 
"Bank  of  C  Home  Savings  Branch."  A 
check  drawn  on  the  branch  was  presented  for 
payment  at  the  parent  bank.  Opinion:  The 
presentment  of  the  check  was  not  sufficient 
and  therefore  would  be  no  basis  for  a  pro- 
test. In  case  of  a  check  dra^\^l  on  the  parent 
bank  and  presented  at  that  bank  where  pay- 
ment was  refused  although  the  drawer  had 
all  his  funds  in  the  branch,  the  bank  would 
not  be  responsible  for  damages.  While  the 
branches  of  a  bank  are  agencies  and  not  dis- 
tinct banks,  the  courts  recognize  that  for  cer- 
tain purposes,  including  the  presentment  and 
payment  of  checks,  the  dilferent  branches  are 
to  be  regarded  as  distinct.  Vol.  4,  p.  552, 
March,  1912. 

263.  (S.  C.)  A  clieck  drawn  by  a  cus- 
tomer of  a  brancli  bank  upon  sucli  l)ranch 
bank  against  funds  deposited  therein  is  pay- 


able only  by  the  branch  upon  which  drawn 
and  not  by  the  parent  bank.  Presentment 
at  the  parent  bank  would  not  be  sufficient 
presentment  and  would  not  justify  a  pro- 
test.    Vol.  7,  p.  169,  Sept.,  1914. 

Presentment  and  payment  of  note 

264.  (Mich.)  A  note  for  $500  was  made 
payable  at  a  designated  branch  office  of  a 
bank.  The  notary  presented  the  note  at  the 
main  office  and  the  item  was  protested  for 
non-payment.  The  indorser  claims  non-lia- 
bility. Opinion:  Presentment  for  payment 
at  the  main  office  of  the  bank  was  not  suffi- 
cient to  hold  the  indorser.  Vol.  4,  p.  305, 
Nov.,  1911. 

Right  to  establish  branches 

265.  (Mass.)  Under  the  present  Fed- 
eral law,  national  banks  are  not  permitted 
to  establish  branches,  either  in  or  outside  of 
the  city  in  which  they  are  located.  Under 
the  ^lassachusetts  law  a  savings  bank  can  es- 
tablish branches  for  deposit  only  within  a 
certain  area  and  under  certain  restrictions. 
A'ol.  8,  p.  1102,  June,  191G. 

XoTE:  Section  25  of  the  Federal  Reserve  Act 
authorizes  national  banks  liaviiii,'  cajiilal  of 
.51. 0(10, 000  or  more,  Jipon  j)ornii-;si()ii  <if  Federal 
Reserve  Board,  to  establisli  hrauelies  in  foreign 
eouiitries  or  dependencies  or  insular  possessions 
of  the  United  States. 


CERTIFICATE  OF  DEPOSIT 


Demand  and  time  certificates  dis- 
tinguished 

See  4 it 7 

266.  (Colo.)  The  provision  printed  on 
the  back  of  a  certificate  of  deposit  payal)le  on 
return  that  "this  certificate  is  payable  twelve 
months  after  date"  is  part  of  the  terms  of  the 
contract  on  tlio  face  so  that  the  instrument  is 
not  a  demand  but  a  time  certificate  of  de- 
posit.    A'ol.  7,  p.  894,  May,  1915. 

267.  (Mo.)  The  provision  in  a  certi- 
ficate of  deposit  payable  on  return  properly 


indorsed  for  "interest  at  the  rate  of  4  per 
cent,  per  annum  if  \vit  twelve  months"  does 
not  prevent  earlier  presentment  if  the  holder 
chooses  to  waive  interest.  Vol.  3,  p.  584, 
April.  1!)11. 

268.  (Okla.)  Where  a  certificate  of  de- 
posit provides  that  the  money  has  been  de- 
posited payable  in  one  year  from  date  at 
4  per  cent,  interest,  the  certificate  is  not  due 
until  the  expiration  of  twelve  months  from 
date,  and  the  holder  cannot  compel  payment 
before  maturity,  although  payment  of  inter- 
est is  waived.     Vol.  3,  p.  733,  June,  1911. 


33 


269 


1)1  C; EST  OF  LEGAL  OPINIONS 


Presentment  after  death  of  payee 

269.  (Mich.)  Wlierc  a  no^^otiiible  cor- 
tilieate  ol"  deposit  properly  indorsed  was  ])re- 
s(Mil(>d  for  })a}meiit  at  a  l)ank  by  a  bona  fide 
liolder  after  tbo  payee's  death.  Opinion: 
that  the  l)ank  should  pay  such  certideate. 
The  case  dilfers  from  that  of  a  clieck,  in 
which  the  death  of  the  drawer  revokes  the 
authority  of  the  bank  to  pay,  in  the  absence 
of  statute  expressly  authorizing  post  mortem 
])ayment.    A'ol.  -i/p.  G85,  May,  1913. 

270.  (Miss.)  A  bank  should  pay  a  ne- 
gotiable certificate  of  deposit  to  a  bona  fide 
indorsee  of  the  payee,  although  not  presented 
until  after  the  pavce's  death.  Vol.  G,  p.  274, 
Oct.,  WU. 

Payable  "in  current  funds" 

See  125 

271.  (Ind.)  A  certificate  of  deposit  pay- 
able '"in  current  funds"  is  not  negotiable  in 
Indiana.  The  decisions  of  other  states  con- 
flict upon  this  proposition.  Vol.  3,  p.  468, 
Feb.,  1911. 

272.  (Minn.)  The  original  owner  of  a 
certificate  of  deposit  payable  "in  current 
funds"  was  held  up  by  a  thief  and  forced  to 
indorse  and  part  with  the  certificate.  The 
thief  negotiated  it  to  an  innocent  purchaser 
for  value.  In  the  meantime  the  issuing  bank 
was  notified  to  stop  payment.  Opinion: 
According  to  a  Minnesota  decision,  the  certi- 
ficate is  negotiable,  and  for  that  reason  the 
innocent  holder  is  protected  as  against  the 
original  owner.     Vol.  2,  p.  20,  Jul}^,  1909. 

Rights  of  innocent  purchaser 

273.  (Pa.)  A  bank  issued  a  negotiable 
certificate  of  deposit  for  $500  to  one  of  its 
depositors  in  exchange  for  her  check  on  the 
same  bank  for  $500,  which,  as  it  turned  out, 
was  an  overdraft  of  $100.  The  bank  seeks 
to  know  if  it  can  refuse  payment  in  case  the 
certificate  should  come  to  it  through  an  inno- 
cent purchaser.  Opinion:  So  long  as  the 
certificate  remains  in  the  depositor's  hands 
or  is  presented  by  her  in  person,  the  bank  has 
the  right  to  withhold  papnent  of  the  excess 
over  $400.  But  if  the  certificate  had  been 
negotiated. to  a  holder  in  due  course  the  bank 
would  be  liable  for  the  full  amount  and  would 
have  to  look  to  the  depositor  for  the  over- 
draft.    Vol.  9,  p.  750,  March,  1917.      • 

274.  (Wash.)  A  bank  issued  a  nego- 
tiable demand  certificate  to  a  depositor 
against  deposit  of  his  check  upon  another 
bank.     Four  days  later  the  bank  over  the 


long  distance  telej)liono,  uj)on  depositor's  re- 
<{uest,  advised  tiiat  the  certificate  could  be 
cashed  0.  K.,  as  the  dcposite<l  ciieck  had  not 
been  returned.  After  the  certificate  was 
caslied,  the  depositor's  account  in  the  other 
bank  was  attached.  Opinion:  Where  a  bank 
issues  a  negotiable  demand  certificate  against 
deposit  of  a  check  upon  another  bank,  the 
fact  that  the  deposited  check  is  dishonored 
is  no  defense  to  the  liability  of  the  bank  to 
an  innocent  purchaser  of  the  certificate.  This 
transaction  illustrates  the  unwisdom  of  issu- 
ing a  negotiable  certificate  against  uncollected 
funds.     Vol.  10,  p.  467,  Dec,  1917. 

Insanity   of  payee 

See  84G,  847 

275.  (111.)  A  certificate  of  deposit  was 
issued  to  a  depositor,  who  later  became  in- 
sane. The  certificate  was  indorsed  in  blank 
and  the  bank  is  doubtful  Avhether  the  depos- 
itor was  insane  at  the  time  of  the  indorse- 
ment. A  relative  was  the  holder  of  the  cer- 
tificate. Opinion:  The  bank  should  refuse 
payment  to  the  holder  of  the  certificate  in  the 
absence  of  positive  proof  that  the  indorse- 
ment in  blank  and  the  delivery  took  place 
while  the  depositor  was  sane.  A  guardian 
or  committee  of  the  lunatic  should  be  ap- 
pointed to  receive  pa3'ment.  If  the  holder 
sues  the  bank  a  bill  of  interpleader  should  be 
filed.     Vol.  8,  p.  32,  July,  1915. 

Negotiability 
See  271,  272 

276.  (Mich.)  A  bank  upon  receiving 
from  an  attorney  $500,  delivered  its  certifi- 
cate of  deposit  to  John  Doe.  The  certificate 
was  made  payable  to  John  Doe  in  case  of 
default  of  a  certain  bond  in  the  case  of  People 
vs.  Jones.  The  court  records  showed  that 
Jones  was  acquitted,  and  as  there  was  no  de- 
fault on  the  bond,  the  attorney  requested  re- 
turn of  the  certificate,  which  was  refused. 
The  bank,  however,  returned  the  money  to 
the  depositor  without  the  surrender  of  the 
certificate.  Later,  the  certificate  indorsed  by 
John  Doe  in  blank  was  presented  to  the  bank 
and  payment  refused  because  of  no  evidence 
to  show  that  Jones  had  defaulted  on  his  bond. 
Opinion:  A  certificate  of  deposit  payable  on 
condition  is  not  negotiable,  and  where  the 
condition  does  not  eventuate  the  issuing 
bank  may  safely  return  the  money  to  the  de- 
positor without  surrender  of  the  certificate. 
The  condition  not  being  performed,  neither 
the  payee  nor  an  assignee  acquires  any  en- 
forceable rights  therein.  Vol.  10,  p.  312, 
Oct.,  1917. 


34 


CERTIFICATE  OF  DEPOSIT 


283 


277.  (Cal.)  A  certificate  of  deposit 
drawn  payable  to  specified  payee  with  the 
words  "non-transferable"  written  on  or  across 
the  face  of  the  instrument  is  not  negotiable. 
Yol.  5,  p.  374,  Dec,  1912. 

Statute  of  limitations 

278.  (Iowa.)  A  national  bank  in  Xe- 
braska  issued  a  certificate  of  deposit  on  Jan- 
uary 1,  1903,  ''payable  on  return  properly  in- 
dorsed one  year  from  date."  Eleven  years 
have  elapsed  and  said  certificate  has  not  been 
presented  for  payment.  Opinion:  The 
weight  of  authority  (a  few  cases  contrary)  is 
to  the  effect  that  a  certificate  "payable  on  re- 
turn properly  indorsed"  is  not  due  until  de- 
manded and  the  statute  of  limitation  begins 
to  run  only  from  the  time  of  demand.  Where 
the  certificate  is  "payable  on  return  properly 
indorsed  one  3"ear  from  date"  some  courts 
apply  the  same  rule  that  the  statute  does  not 
begin  to  run  until  demand  of  payment  is 
made,  while  other  courts  hold  that  the  statute 
begins  to  run  at  the  time  when  the  certificate 
specifies  it  is  due  and  payable.  Yol.  6,  p. 
624,  March,  1914. 

279.  (Minn.)  A  Minnesota  bank  carries 
on  its  books  two  time  certificates  of  deposit 
issued  in  1907,  payable  in  six  months.  One 
was  issued  to  a  party  since  deceased  and  the 
other  to  a  stranger,  who  cannot  be  located. 
The  bank  seeks  to  dispose  of  the  certificates. 
Opinion:  In  Minnesota,  a  time  certificate  of 
deposit  is  outlawed  six  years  after  maturity, 
and  the  bank  may  credit  undivided  profits 
with  the  amount  of  an  unpaid  certificate.  In 
some  states  statutes  exist  requiring  unclaimed 
deposits  to  be  paid  over  to  the  public  author- 
ities.    Vol.  9,  p.  908,  May,  1917. 

Bank's    obligation   to    know   payee's 

signature 

See  512,  515,  5G3 

280.  (Ohio.)  A  bank  issued  a  certifi- 
cate of  deposit  without  keeping  a  record  of 
tbc  payee's  signature.  The  certificate  was 
presented  at  the  clearing  house  and  paid  by 
the  bank  of  deposit,  althougli  the  presenting 


bank  refused  to  guarantee  the  payee's  indorse- 
ment. In  the  event  the  payee's  indorsement 
was  a  forgery,  the  paying  bank  questions  its 
right  of  recover}'.  Opinion:  Where  bank 
keeps  file  of  signatures  of  payees  to  whom 
certificates  of  deposit  issued  it  is  bound  to 
know  payee's  indorsement  upon  such  certi- 
ficates and  cannot  recover  money  paid  on 
forgery  thereof.  But  this  rule  is  limited  to 
cases  where  signature  is  kept  on  file.  Vol.  9, 
p.  5S4,  Jan.,  1917. 

Transfer  without  indorsement 

281.  (111.)  A  certificate  of  deposit  is- 
sued to  A  was  pledged  by  A  to  B  for  value, 
without  indorsement.  After  its  maturity  A, 
upon  a  false  written  statement  that  he  had 
lost  and  had  not  negotiated  the  certificate, 
obtained  payment  from  the  bank.  B  not 
having  been  paid  by  A  now  seeks  to  hold  tbe 
bank  liable  on  the  unindorsed  certificate 
pledged  by  A.  Opinion:  The  bank  is  not 
liable  to  B  who,  taking  without  indorsement, 
holds  the  certificate  subject  to  any  defense 
good  against  A.  A  is  criminally  liable  for 
obtaining  monev  under  false  pretenses.  Vol. 
5,  p.  668,  April,  1913. 

Withholding  payment  of  time  certificate 

282.  (Iowa.)  The  Iowa  statute  allows 
savings  banks  to  require  sixty  days'  notice  of 
withdrawal  of  a  savings  deposit  and  question 
is  raised  whether  a  bank  would  have  the  right, 
by  giving  pul)lic  notice,  to  withhold  payment 
of  time  certificates  of  deposit  sixty  days  after 
due  date.  Opinion:  A  bank  must  pay  its 
time  certificate  of  deposit  at  maturity  accord- 
ing to  its  terms,  in  the  absence  of  a  contract 
with  the  debtor  expressed  in  certificate 
or  otherwise  binding,  which  would  give 
it  the  right  to  require  notice  of  withdrawal 
given  at  a  specified  time  before  payment,  un- 
less there  is  some  statutory  provision  which 
gives  it  such  right.  Iowa  statute  giving  sav- 
ings banks  rigiit  to  require  sixty  days'  notice 
of  withdrawal  of  savings  deposits  interpreted 
not  to  apply  to  time  certificates  of  deposit 
having  fixed  and  definite  time  of  maturitv. 
Vol.  10,  p.  123,  Aug.,  1917.     See  497,  504. " 


CHECKS -PAYMENT  OF 

For  Eevocation  of  Check  by  BankruptLy,  216;  by  Death,  4o2  et  seq.;  by  Insanity  or  Incom- 
petency, 816  et  seq.;  see  also  275,  302 

Ambiguous  and  incomplete  checks 


See  891 

283.     (Cal.)     The  amount  written  in  tbe 
body  of  a  check  is  $100.89  and  in  the  margin 


$189.  The  presenting  bank  protested  it  for 
non-payment,  as  the  drawee  refused  to  pay 
without  a  guaranty  of  the  amount,  which  the 
})resonting  bank  would  not  furnish.  Opin- 
ion: Wbere  the  amount  written  in  the  body 


35 


284 


DKJKS'r  OF  LEGAL  OPiXiONS 


of  a  chock  is  $I()().S!)  niul  in  tlic  niar^^Mii  $189, 
the  sum  denoted  in  llio  body  is  llic  amount 
])ayal)l('  and  the  check  is  proiostahlc  n\Hm  re- 
fusal to  pay  tliat  amount,  though  not  if  the 
refusal  is  to  i)ay  the  larger  amount  expressed 
in  the  margin.     Vol.  11,  p.  2in,  Oct.,  1918. 

284.  (Pa.)  Wlure  a  check  has  a  pen 
line  drawn  through  the  payee  blank  or  the 
pa3ce  blank  is  unfilled,  it  is  an  unsafe  in- 
strument for  a  purchaser  to  acquire  or  a 
drawee  bank  to  pay.  In  the  present  condi- 
tion of  the  law,  it  might  1)C  held  to  be  payable 
to  the  bearer  or  it  might  be  held  an  incom- 
plete and  invalid  instrument.  Whore  the 
drawer  indorsed  the  instrument,  it  would  be 
extremely  doubtful  whether  such  indorse- 
ment would  cure  the  defect.  Vol.  7,  p.  489, 
Jan.,  1915. 

285.  (Pa.)  Under  the  Negotiable  In- 
struments Law,  where  the  drawer  of  a  check 
with  payee  blank  unfdled  entrusts  the  instru- 
ment to  a  holder  with  authority  to  use  it  for 
a  specified  purpose  and  the  holder  in  breach 
of  trust  fills  in  his  own  name  as  payee  and 
negotiates  it  to  an  innocent  purchaser  for 
value,  the  purchaser  w^ould  be  protected  as 
would  be  the  drawee  bank  which  paid  such  a 
check;  but  if  the  holder  who  committed  the 
breach  of  trust  should  negotiate  it  without 
authority,  leaving  the  payee  blank  imfilled, 
the  purchaser  would  take  the  check  subject 
to  the  defense  of  the  drawer  that  it  had  been 
used  without  his  authority  and  if  the  drawee 
bank  paid  such  a  check  witli  the  payee  blank 
unfilled,  the  drawer  could  object  to  being 
charged  with  its  amount  for  like  reason. 
Vol.  7,  p.  489,  Jan.,  1915. 

Instruments  purporting  to  be  bearer 
checks 

286.  (Mass.)  A  check  was  drawn  pay- 
able to  the  order  of  "John  Smith  (bearer)."' 
A  party  indorsed  it  John  Smith  and  pre- 
sented the  item  to  the  drawee  which  paid  it 
without  identification.  Opinion:  The  check 
was  not  payable  to  any  bearer  but  to  John 
Smith,  wlio  was  the  bearer,  and  identification 
was  therefore  necessary  for  the  bank's  safetv. 
Vol.  4,  p.  431,  Jan.,  1912. 

287.  (Miss.)  Where  the  drawer  uses  a 
form  of  check  "pay  to or  bear- 
er," scratches  out  "or  bearer''  and  makes  the 
check  read  "pay  to  John  Jones,"  this  is  nei- 
ther a  bearer  check  nor  an  order  check  but  is 
one  payable  to  John  Jones  only  and  is  not 
negotiable.     Vol.  4,  p.  613,  April,  1912. 


288.  (Wis.)  A  check  payable  to  the 
order  of  "cash"  contains  several  indorsements 
in  blank  and  one  s])ecial  indorsement.  Ofnn- 
ion:  The  instrument  is  jiayable  to  bearer  and 
is  transferable  by  delivery.  It  does  not  re- 
quire any  indorsement  at  all,  either  of  maker 
or  any  one  else,  to  make  it  transferable  or 
l)ayablc.     Vol.  2,  p.  303,  Jan.,  1910. 

Bearer  check  without  indorsement 

Sec,  070,  G80 

289.  (Ala.)  A  Jjank  followed  the  prac- 
tice of  paying  checks  drawn  on  it  payable 
to  "cash."  Payment  was  made  to  the  hold- 
ers without  indorsement  of  the  drawer  and 
the  bank  questions  the  safety  of  paying  such 
checks  ^vlien  not  presented  by  the  drawer  in 
person.  Opinion:  A  check  drawn  payable  to 
"cash"  is  payable  to  bearer  and  can  be  safely 
paid  by  the  drawee  bank  to  a  holder  other 
than  the  drawer  without  the  indorsement  of 
the  latter.  The  drawee  is  under  obligation 
to  the  drawer  to  pay  in  the  absence  of  evi- 
dence of  circumstances  indicating  that  the 
holder  may  have  come  by  the  check  wrong- 
fully.    Vol.  10,  p.  311,  Oct.,  1917. 

290.  (111.)  A  check  drawn  payable  to  A 
or  bearer  was  lost  by  A  and  a  bank  paid  the 
amount  to  the  bearer  without  A's  indorse- 
ment, A  not  receiving  any  money.  The  check 
contained  several  special  indorsements.  Opin- 
ion: The  check  being  payable  to  bearer  could 
be  negotiated  by  delivery  even  if  indorsed 
specially  and  payment  by  the  bank  to  the 
bearer  was  valid,  and  A  was  the  loser.  Vol. 
4,  p.  488,  Feb.,  1912. 

291.  (Pa.)  A  check  payable  to  bearer 
does  not  require  indorsement,  and  payment  to 
bearer  without  indorsement  is  proper  and 
chargeable.  ]\Iany  banks  request  indorse- 
ment by  the  holder,  but  if  such  request  is 
denied  it  is  not  sufficient  reason  for  refusing 
payment  of  the  check.  Vol.  3,  p.  680,  May, 
1911. 

292.  (S.  Dak.)  Eichard  Roe  draws  his 
check  payable  to  "John  Doe  or  Bearer."  Can 
the  paying  bank  be  compelled  to  pay  the 
amount  to  a  third  party  as  bearer  without  the 
indorsement  of  the  payee?  Opinion:  A 
check  payable  to  "John  Doe  or  Bearer"  is 
payable  to  bearer  and  does  not  require  the 
indorsement  of  John  Doe  to  entitle  the  bearer 
to  receive  pavment.  Vol.  11,  p.  393,  Jan., 
1919. 

Checks    signed    in   blank 

293.  (Cal.)  A  thief  stole  from  a  check- 
l)Ook  a  check  bearing  onlv  the  name  of  the 


.^fi 


CHECKS— PAYMENT  OF 


299 


drawer,  and  negotiated  it  for  value  to  an 
innocent  purchaser.  Payment  of  the  check 
was  stopped.  Opinion:  Payment  can  he 
stopped  and  the  drawer  is  not  liahle  to  the 
innocent  purchaser.  Vol.  G,  p.  94,  Aug., 
1913.     See  304,  800. 

294.  (111.)  A  certain  liorse  buyer  in  In- 
diana had  been  sending  dated  and  signed 
checks  to  his  agent  in  Illinois,  who  had  au- 
thority to  fill  in  the  amounts.  On  one  oc- 
casion the  agent  made  out  a  check  for  $(568.25 
which  should  have  been  for  $550  and  nego- 
tiated it  to  a  bank  which  had  been  in  the 
habit  of  cashing  such  checks.  The  drawer 
stopped  payment.  The  purchasing  bank 
seeks  to  hold  the  drawer.  Opinion:  Under 
the  common  law  rule  the  drawer  would  be 
liable  to  a  bona  fide  holder  for  the  increased 
amount,  but  not  so  liable  under  the  Negoti- 
able Instruments  Law  unless  the  amount  was 
filled  in  before  negotiation  and  the  purchas- 
ing bank  had  no  notice  that  the  check  was 
filled  in  for  an  unauthorized  amount.  Vol. 
3,  p.  734,  June,  1911. 

Conversion  of  check  by  bank 

295.  (Md.)  The  holder  of  a  check  pre- 
sents it  to  a  l)ank  for  certification  and  the 
bank,  instead  of  returning  it  to  the  holder  un- 
certified, there  being  insufficient  funds  and 
the  drawer  also  having  stopped  payment, 
hands  the  check  over  to  the  drawer.  The 
original  holder  threatens  to  bring  suit  against 
the  bank  to  recover  the  check.  Opinion: 
The  bank  is  liable  to  the  holder  for  conver- 
sion of  the  check,  unless  it  can  affirmatively 
prove  that  the  drawer  had  a  good  defense 
thereon  against  the  holder.  It  is  doul)tful 
whether  the  bank  could  be  held  as  acceptor 
under  the  Negotiable  Instruments  Act.  Vol, 
11,  p.  558,  April.  1919.     See  340. 

Receipt  as   substitute  for  counter  check 

296.  (N.  Y.)  A  receipt  signed  by  a  de- 
positor acknowledging  payment  of  a  dei)osit 
would  not  be  of  equal  protection  to  the  bank 
as  a  counter  check,  where  payment  was  made 
to  one  other  than  the  depositor  personally, 
for  sliould  the  reccii)t  be  presented  by  a 
wrongful  holder  it  would  not  l)e  binding  on 
the  depositor,  as  would  a  check  wliich  con- 
tains an  order  and  autliority  to  the  bank  to 
pay.  In  case  of  savings  deposit  payable 
only  on  presentation  of  book,  payment  to  a 
wrongful  holder  upon  presentation  of  book 
and  receipt  might  be  valid  if  reasonal)lc 
care  was  used.     Vol.  10,  p.  853,  June,  1918. 


Crediting  depositor's  account  with  checks 
on  same  bank  operates  as  payment 

297.  (Cal.)  A  bank  having  a  commer- 
cial and  savings  department  was  in  the  habit 
of  receiving  checks  from  its  customer  depos- 
ited to  his  credit  in  his  savings  account,  said 
checks  being  drawn  on  the  commercial  de- 
partment of  the  same  bank.  Occasionally  the 
checks  so  deposited,  when  presented  to  the  de- 
partment on  which  drawn  were  found  to  be 
not  good,  or  that  payment  of  the  same  had 
been  stopped.  In  such  cases  it  was  the  bank's 
practice  to  charge  the  item  back  to  its  depos- 
itor. It  was  claimed  that  when  the  bank  ac- 
cepted a  check  drawn  on  itself  even  though 
on  another  department,  for  deposit  over  the 
counter,  that  it  constitutes  payment  of  the 
check  and  the  bank  has  no  right  to  charge  the 
item  back  to  its  depositor,  even  though  said 
check  was  found  not  good  or  payment  thereon 
had  been  stopped.  Opinion:  In  California, 
contrary  to  the  majority  of  cases  elsewhere,  it 
has  been  held  that  the  credit  to  a  depositor 
of  a  check  drawn  on  the  same  bank  by  another 
depositor,  is  not  equivalent  to  payment,  but 
the  check  is  presumptively  taken  by  the  bank 
for  collection  from  itself  and  may  be  charged 
back  to  the  depositor  at  the  close  of  the  day  if 
the  funds  drawn  against  are  insufficient. 
Same  rule  applied  to  right  of  departmental 
bank  to  charge  back  overdraft  upon  one  de- 
partment deposited  in  another.  Vol.  10,  p. 
201,  Sept.,  1917. 

298.  (Okla.)  A  bank  credited  its  cus- 
tomer with  the  proceeds  of  a  check  drawn 
upon  it,  and  in  sorting  the  checks  discovered 
that  tlie  drawer  had  no  account.  The  drawer 
happened  in  the  bank  a  few  minutes  later 
and  instructed  the  cashier  to  change  the  name 
of  the  drawee  to  another  bank.  The  check 
was  presented  to  the  new  drawee  the  same 
afternoon,  but  ])ayment  had  been  stopped. 
The  dejxjsitor  of  the  check  obj(vts  to  being 
charged  therewith.  Opinion:  The  amount  is 
not  chargeable  l)ack  to  the  depositor,  if  he 
acted  in  good  faith,  because  of  the  rule 
(adoj)ted  by  a  majority  of  courts),  that  credit 
of  a  check  upon  the  depositary  operates  as 
payment  and  is  irrevocable.  The  fact  that 
the  drawer,  after  the  check  had  been  paid  by 
the  credit,  changed  tiie  check  and  made  it 
payal)lc  at  another  bank  does  not  atTect  the 
rights  of  the  pavee.  Vol.  8,  p.  801,  ^larch, 
191(;. 

Relation  of  bank  upon  deposit  of  check 

299.  (111.)  A  bank  received  for  deposit 
a  clieck  of  its  customer  drawn  on  an  out-of- 


37 


300 


DIGEST  OF  LEGAL  OriXIONS 


town  point  and  credited  him  with  tlic  amount. 
Before  the  check  was  paid,  tlie  customer  de- 
manded certilication  of  a  check  ai^ainst  his  de- 
posit. Opinion:  Tlie  authorities  are  in  con- 
Hict  whether  tlie  giving  of  credit  for  a  de- 
posited check  makes  the  bank  debtor  or  agent 
for  collection,  but  the  relation  is  generally 
eont rolled  by  custom  or  agreement  making 
l)ank  an  agent  and  not  obliged  to  pay  against 
uncollected  funds — certification  as  distin- 
guished from  payment  is  optional  with  bank 
and  not  obligatory.  Vol.  8,  p.  40,  July,  1915. 
See  -128,  42:'). 

Point  of  time  when  check  received 

through  mail  is  paid 

See   135 

300.  (Iowa.)  Where  a  check  against 
suflicient  funds  is  received  by  the  drawee 
through  tlie  mail,  it  is  paid  at  the  time  it  is 
charged  to  the  drawer's  account  and  can- 
celled; so  that  thereafter  the  drawer  cannot 
stop  payment  nor  can  a  receiver  or  assignee 
of  the  drawer  claim  the  fund,  although  remit- 
tance has  not  been  made.  Some  courts  hold 
the  check  paid  even  before  charged  to  account, 
where  it  has  been  cancelled  and  filed  as  paid. 
But  where  a  check  against  insufficient  funds 
or  a  forged  check  received  through  the  mail 
is  by  mistake  marked  ''^paid"  and  the  mistake 
corrected  before  it  is  charged  to  the  account, 
some  authorities  support  the  conclusion  that 
the  check  is  not  finally  paid  but  the  mistake 
can  be  corrected  and  the  check  returned.  Vol. 
11,  p.  604,  May,  1919. 

301.  (Mass.)  A  check  against  sufficient 
funds  is  received  through  the  mail  by  a 
drawee  bank  for  payment  and  remittance. 
The  drawee  seeks  to  find  out  at  what  time  in 
the  physical  handling  of  the  check  by  the 
drawee  it  is  paid,  after  which  it  will  be  too 
late  for  the  draw'cr  to  stop  payment,  or  to 
withdraw,  or  control  the  fund.  Opinion: 
The  check  is  paid  at  the  time  the  amount  is 
charged  to  the  drawer's  account,  and  the 
check  is  cancelled ;  thereafter  the  fund  is  held 
for  the  credit  of  the  holder  and  control  of  the 
drawer  ceases  and  he  has  no  right  to  stop  paj'- 
ment,  even  though  actual  remittance  has  not 
been  made.     Vol.  9,  p.  899,  May,  1917. 

Drawer  of  check  a  fugitive  from  justice 

302.  (Pa.)  A  depositor  committed  a 
crime  and  became  a  fugitive  from  justice,  his 
whereabouts  being  unknown.  A  check  drawn 
by  him  still  remains  outstanding  and  a  cred- 
itor notifies  the  bank  to  withhold  pa}'ment 


of  the  deposit.  Opinion:  While  death,  insan- 
ity or  insolvency  of  a  depositor  revokes  the 
authority  of  a  bank  to  pay  his  check,  it  has 
never  been  decided  that  the  fact  that  a  de- 
positor is  a  fugitive  from  justice  operates, 
ipso  facto,  as  a  revocation.  A  bank  should 
I)ay  his  outstanding  check  in  the  absence  of 
circumstances  showing  that  the  fugitive  is 
seeking  to  defraud  his  creditors  and  that  the 
check  is  given  in  bad  faith.  \'ol.  1 1,  p.  669, 
June,  1919. 

Drawer's  liability  on  unpaid  check 

303.  (Okla.)  John  Doe  drew  two  checks 
of  the  amounts  of  $196.50  and  $53.50,  which 
he  gave  to  Smith  in  payment  of  a  note  held 
by  Smith.  Smith  surrendered  the  note  and 
received  the  proceeds  of  the  smaller  check, 
but  the  larger  check  was  dishonored  because 
of  insufficient  funds.  Doe  afterwards  in- 
dorsed the  larger  check  "0.  K.  after  January 
11,  1913,"  but  subsequently  refused  to  pay 
same.  Opinion:  Smith  has  a  right  of  action 
against  Doe  based  on  the  unpaid  check  and 
Smith's  possession  of  the  note  is  not  necessary. 
Doe's  indorsement  did  not  alter  his  obliga- 
tion on  the  check.  Vol.  8,  p.  914,  April, 
1916. 

Duty  of  care  of  check-book 

304.  (Mo.)  A  customer  carelessly  leaves 
his  check-book  lying  around  the  office,  ac- 
cessible to  clerks,  and  a  blank  check  is  stolen, 
forged  and  paid  by  the  bank.  Opinion:  The 
bank  is  responsible  to  its  customer  for  money 
paid  on  his  forged  signature  and  the  careless- 
ness of  the  customer  is  not  such  negligence 
as  ■  will  charge  him  with  responsibility. 
Vol.  6,  p.  822,  June,  1914.     See  342. 

Payment  of  exchange  charge 

305.  (N.  Y.)  A  drew  his  check  upon  the 
B  bank,  payable  to  C,  who  is  located  at  a  dis- 
tance and  the  check  was  collected  through  the 
Federal  reserve  bank  and  the  funds  remitted 
by  B  to  that  bank.  The  question  was  did  the 
B  bank  have  the  right  without  special  con- 
tract to  charge  A  with  the  exchange  or  cost 
of  remitting  the  funds.  Opinion:  B  bank's 
obligation  is  to  pay  the  check  at  its  banking 
house  and  if  it  remits  the  funds  to  another 
place,  such  service  is  for  the  holder  and  it 
cannot  make  an  exchange  charge  against  the 
drawer  without  his  consent.  Vol.  9,  p.  239, 
Sept.,  1916. 

306.  (N.  M.)  A  bank  wires  B  bank  to 
pay  C  $12,000  and  promises  to  remit.     B 


38 


CHECKS— PAYMEXT  OF 


314 


thereafter  receives  from  A  bank  its  cashier's 
check  of  $12,000,  which  is  subject  to  the  ex- 
change charge  of  $30.  Opinion:  A's  promise 
is  not  fulfilled  by  remitting  a  cashier's  check 
which  is  subject  to  exchange.  B  bank  is  en- 
titled to  receive  the  full  amount  without  de- 
duction of  the  charge.  Vol.  11,  p.  167,  Sept., 
1918. 

For  full  payment  of  account 

See  Statement  of  consideration  altered — 109,   110 

and  Note 

307.  (Cal.)  The  correct  amount  due  to 
a  bank  on  a  note  was  $150  and  the  debtor 
tendered  in  payment  a  check  for  $140,  con- 
taining the  words  "in  full  payment  of  the 
note."  The  bank  accepted  the  check  and  ap- 
plied it  as  a  partial  payment.  Opinion:  The 
check  did  not  settle  the  entire  debt  and  the 
l)ank  can  recover  $10  more.  Had  the  bank's 
claim  been  imcertain  as  to  amount,  its  ac- 
ceptance would  have  barred  recovery  of  the 
balance.     Vol.  4,  p.  430,  Jan.,  1912. 

308.  (Idaho.)  A  contractor  drew  a  check 
payable  to  an  electric  company,  and  made  a 
notation  thereon  to  the  effect  that  the  check 
was  in  full  payment  of  account  on  a  certain 
contract.  The  electric  company  indorsed  the 
check  and  added  "This  is  to  apply  on  account 

amounting  to  $ and  is  not  payment  in 

full."  Opinion:  Where  the  payee  accepts 
and  collects  check  stated  to  be  "in  full  of 
account"  for  less  than  amount  of  his  claim, 
he  is  not  debarred  from  recovering  balance  if 
amount  of  claim  is  liquidated  or  undisputed, 
but  if  amount  is  the  subject  of  honest  dispute, 
his  acceptance  and  collection  of  check  oper- 
ates as  a  bar  to  further  recovery,  even  though 
paj'ee  negatives  condition  and  asserts  check 
is  received  as  part  payment  only.  Vol.  8, 
p.  699,  Feb.,  1916. 

309.  (111.)  A  debtor  and  creditor  had 
an  honest  dispute  as  to  the  amount  due  upon 
an  open  account  as  shown  by  their  respective 
books.  The  debtor  sent  a  check  for  less  than 
the  amount  claimed,  stated  to  be  "in  full  of 
account."  Opinion:  Where  the  dispute  be- 
tween the  debtor  and  creditor  is  bona  fide, 
the  acceptance  of  the  check  for  the  less 
amount  Avould  bar  recovery  of  any  further 
amount.     Vol.  7,  p.  893,  May,  1915. 

310.  (Md.)  Where  check  "in  full"  is 
given  for  a  fixed  and  undisputed  claim  of 
greater  amount,  acceptance  by  creditor  does 
not  bar  recovery  of  balance — but  where  claim 
is  disputed  and  unliquidated,  acceptance  by 
creditor  prevents  further  recoverv.  Vol.  5, 
p.  590,  March,  1913. 


311.  (Mass.)  The  maker  of  a  check 
given  for  a  debt  has  written  thereon  "in  full 
to  March  1,  1911."  The  payee  desires  to 
know  whether  the  acceptance  by  him  of  the 
check  will  operate  as  an  acknowledgment  on 
liis  part  that  the  amount  of  the  check  is  in 
full  to  March  1st.  Opinion :  Where  the  check 
is  given  for  an  unliquidated  debt  or  claim, 
acceptance  by  the  payee  bars  further  recov- 
ery; but  it  is  otherwise  where  the  amount  is 
not  in  dispute  and  the  check  is  less  than  the 
sum  due.     Vol.  4,  p.  218,  Oct.,  1911. 

Instrument  payable  at  future  date 

312.  (Ark.)  An  instrument  drawn  on  a 
check  form,  bearing  date  ]May  16,  1918,  was 
presented  at  a  bank  and  paid  May  20th.  In 
the  bodv  of  the  check  form  was  written  "Due 
and  payable  Tuesday,  May  21,  1918."  Opin- 
ion: The  instrument  is  not  a  post-dated 
check  but  a  bill  of  exchange  drawn  by  a  cus- 
tomer upon  the  bank,  payable  on  May  21. 
The  bank  is  governed  by  the  words  "due  and 
payable  Tuesday,  May  21,  1918,"  contained 
in  the  body  over  the  drawee's  signature,  and 
should  not  pay  it  before  that  time.  The  in- 
strument is  a  bill  of  exchange  and  is  subject 
to  the  rule  governing  bills  of  exchange  which 
gives  the  holder  the  right  to  present  for  ac- 
ceptance and  protest  for  non-acceptance  at 
any  time  after  he  receives  the  instrument  and 
before  its  maturity.  Vol.  10,  p.  854,  June, 
1918. 

Check  given  for  gambling  debt 

313.  (111.)  Richard  Roe  issues  his  check 
to  his  own  order  and  after  indorsing  it  de- 
livers it  to  John  Doe  in  payment  of  a  gam- 
bling debt.  The  check  was  presented  by  Doe 
and  returned  to  him  by  the  bank  without  no- 
tation, in  obedience  to  Roe's  stop  order.  Later 
Roe  cashed  the  check  at  another  bank,  wliich 
had  no  knowledge  of  the  whole  transaction. 
This  bank  regarding  the  instrument  as  a 
bearer  check  seeks  to  hold  the  drawer  respon- 
sible. Opinion:  In  Illinois  and  many  other 
states  a  check  or  other  instrument  given  in 
jiayment  of  a  gambling  debt  is  void  and  has 
l)een  held  unenrorceal)le  even  in  the  hands  of 
a  bona  fide  holder.  In  some  states,  it  has 
been  held  the  Negotiable  Instruments  Act 
protects  the  holder  in  due  course  of  such  an 
instrument,  while  in  other  states  the  contrary 
has  been  held.     Vol.  11,  p.  277,  Nov.,  1918. 

314.  (W.  Va.)  A  bank  cashed  a  check 
in  good  faith  drawn  by  A,  payable  to  B. 
Payment  was  stopped  by  A,  who  declared  that 


39 


31') 


DIGEST  OF  LEGAL  OPINIONS 


the  clieck  was  fijivcn  for  a  <,fanil)linf(  debt. 
Opiniun:  Before  the  Negotiable  Instruments 
Act  it  was  held  that  the  bank  which  inno- 
cently purchased  a  check  or  note  given  for  a 
gambling  debt  and  declared  void  by  state 
statute  iiad  no  right  of  recovery.  The  de- 
cisions conflict  whether  the  Negotiable  In- 
struments Act  protects  a  holder  in  due  course 
in  such  cases.  Tiiat  Act  ])rovi(lcs  that  "a 
holder  in  due  course  holds  the  instrument  free 
from  any  defect  of  title  of  prior  parties  and 
free  from  defenses  available  to  prior  parties 
among  themselves,"  and  it  has  not  been  de- 
cided in  West  Virginia  whether  this  provi- 
sion repeals  the  state  statute  declaring  gaming 
contracts  void.     Vol.  d,  p.  348,  Oct.,  1!J16. 

Effect  on   negotiability  of  provision  "in 

exchange" 

See   901,   1142 

315.  (Iowa.)  A  Chicago  bank  sends  an 
Iowa  bank  for  collection  and  remittance  a 
check  drawn  on  X  bank  in  Iowa  payable  "in 
exchange."  The  collecting  bank  remits  the 
Chicago  bank  the  face  of  the  check,  adds  the 
exchange  and  presents  to  the  X  bank  which 
refuses  to  pay  the  amount  plus  exchange. 
The  X  bank  contends  the  collecting  bank  has 
no  right  to  charge  it  with  exchange  for  the 
service  of  remitting.  The  latter  contends 
that  on  a  check  so  drawn,  the  drawer  agrees 
to  pay  the  exchange  charges  which  would 
otlierwise  fall  on  the  payee.  It  asks  as  its 
right  to  protest  the  check.  Opinion:  Accord- 
ing to  some  courts  the  check  is  not  negotiable 
because  not  payable  in  money  and  it  is  there- 
fore questionable  whether  it  is  properly  pro- 
testable.     Vol.  2,  p.  33-i,  Feb.,  1910. 

316.  (N.  Y.)  Checks  are  sometimes 
made  ])ayable  "in  New  York  exchange"  or  "in 
New  York  exchange  at  current  rates"  and 
the  question  frequently  arises  as  to  the  nego- 
tiability of  an  instrument  so  payable.  Opin- 
ion: In  ^Minnesota,  Missouri  and  Illinois  it 
has  been  held  that  the  instrument  is  not 
payable  in  money,  but  in  a  bill  of  exchange 
which  is  commodity  or  property  and  therefore 
is  not  negotiable.  Another  view  taken  by  a 
Federal  Court  holds  that  the  instrument  is 
payable  in  money  with  exchange  added  and 
is  therefore  negotiable.  A  more  recent  case 
in  the  Federal  Court  holds  that  the  instru- 
ment is  payable  in  money  (i.e.  "in"  or  bv 
giving)  a  bill  of  exchange  therefor  on  New 
York  and  is  negotiable  under  the  Negotiable 
Instruments  Act.  It  is  obvious  in  view  of 
the  above  conflict  that  no  opinion  can  be 
asserted  with  positiveness  either  in  affirma- 


tion or  denial  of  the  negotiability  of  a  check 
payable  "in  New  York  exchange."  Vol.  9, 
p.  741,  March,  1917. 

Effect  of  memorandum  on  check 

Sec  :y.n,  128!) 

317.  (N.  Y.)  A  check  was  dated  Feb. 
(ith  and  in  the  loft  hand  corner  was  a  pencil 
memorandum  "to  l)e  used  Feb.  8th."  Opin- 
ion: The  bank  could  not  safely  pay  before 
February  8th.     Vol.  3,  p.  518,  March,  1911. 

Checks    for    more   than   balance 

318.  (Fla.)  Where  a  number  of  checks 
are  presented  to  a  bank  simultaneously 
through  the  clearing  house  or  by  mail  which 
aggregate  more  than  the  amount  to  the  cus- 
tomer's credit,  the  bank  is  bound  to  pay  the 
checks  to  the  extent  of  the  amomit  on  deposit 
and  has  the  option  to  select  wliich  it  will  pay 
and  which  reject  in  the  absence  of  a  clearing- 
house rule  or  custom  to  the  contrary.  Vol. 
ll,p.  485,  March,  1919. 

319.  (Ky.)  AVhere  a  number  of  checks 
aggregating  more  than  the  customer's  balance 
are  presented  at  the  same  time  through  the 
Clearing  House  and  the  balance  is  sufficient 
to  pay  only  some  of  them,  the  l}ank  must  pay 
such  of  the  checks  as  the  deposit  is  sufficient 
to  meet  and  may  choose  which  to  pay  and 
which  to  reject,  but  it  will  be  liable  in  dam- 
ages if  it  returns  all  such  checks  unpaid. 
Checks  presented  through  the  morning's  mail 
have  priority  over  checks  later  presented 
through  the  clearing  house.  Vol.  7,  p.  778, 
April,  1915. 

320.  (La.)  Two  or  more  checks  are 
simultaneously  presented  at  a  bank,  each 
taken  separately  for  less,  but  any  two  aggre- 
gating more  than  the  customer's  balance. 
Opinion:  The  bank  should  not  send  all  the 
checks  back,  but  should  pay  any  one  of  them 
and  return  the  rest.  Vol.  3,  p.  202,  Oct., 
1910. 

321.  (La.)  Two  checks  of  $30  and  $10, 
respectively  were  simultaneously  presented, 
the  smaller  check  being  within  and  the  larger 
check  in  excess  of  the  customer's  balance. 
Opinion:  It  is  the  duty  of  the  bank  to  pay  the 
smaller  check  rather  than  to  dishonor  both 
checks.     Vol.  3,  p.  14G,  Sept.,  1910. 

322.  (S.  C.)  The  customer  of  a  bank 
with  $50  to  his  credit  drew  four  checks  of 
amoimts  of  $10,  $25,  $50  and  $60,  respec- 
tively, in  favor  of  four  different  parties.  The 
checks  bore  the  same  date  and  were  presented 
through  the  clearing  house  at  the  same  time. 


40 


CHECKS— PAYMENT  OF 


328 


Opinion:  Where  a  number  of  checks  aggre- 
gating more  than  the  depositor's  balance  are 
presented  at  the  same  time  through  the  clear- 
ing house  and  the  balance  is  sufficient  to  pay 
some  of  them,  the  bank  must  pay  such  of  the 
checks  as  the  deposit  is  sufficient  to  meet  and 
may  choose  which  to  pay  and  which  to  reject, 
but  it  will  be  liable  in  damages  if  it  returns 
all  such  checks  unpaid.  Vol.  7,  p.  31,  July, 
1914. 

Draft  drawn  on  particular  fund 

323.  (Ala.)  Explanation  is  asked  of 
meaning  of  and  distinction  between  provi- 
sions of  Negotiable  Instruments  Law  that 
(a)  order  or  promise  to  pay  is  unconditional 
though  coupled  with  indication  of  particular 
fund  out  of  which  reimbursement  is  to  be 
made  and  (b)  order  or  promise  to  pay  out  of 
particular  fund  is  not  unconditional.  Opin- 
ion: The  first  stated  provision  relates  to  an 
instrument  not  payable  out  of  a  particular 
fund  but  payable  generally  and  merely  indi- 
cating such  fund  as  a  source  of  reimburse- 
ment. The  last  stated  provision  covers  a  case 
where  the  instrument  is  payable  only  out  of 
a  particular  fund,  and  payment  depends  upon 
the  sufficiency  of  the  fund.  Hence,  in  the 
latter  case,  the  instrument  is  non-negotiable 
because  not  payable  absolutely,  while  in  the 
first  stated  case  negotiability  is  not  affected 
because  payment  is  absolutely  and  uncondi- 
tionally promised.  Vol.  5,  p.  312,  Nov., 
1912. 

Containing  provisions   affecting  negotia- 
bility 

See    347,    513,    801,    1280 

324.  (Kan.)  The  following  bank  checks 
are  submitted  for  criticism :  Check  No.  1  is 
the  ordinary  form  of  bank  check,  except  that 
the  payee  blank  contains  the  words  "pay  to 
the  order  of  payee  shown  on  back."  The 
payee  blank  of  cbeck  No.  2  contains  the  words 
"pay  to  the  order  of  payee  and  all  indorsers 
shown  on  back,"  Opinion:  A  check  made 
payable  "to  the  order  of  payee  shown  on  back" 
designates  the  payee  with  sufficient  certainty 
and  is  negotiable.  The  use  of  this  form  in 
check  No.  1  is  not  preferable  to  tbc  old  style 
of  forms.  The  other  form  sul)mittcd  which 
is  made  payable  to  the  "order  of  payee  and  all 
indorsers  shown  on  back"  would  not  serve  a 
useful  purpose  because  it  provides  for  a  mul- 
tiplicity of  payees.  Vol.  11,  p.  328,  Dec, 
1918. 


Not  payable  through  express  company 

S.'o   ;!!I2 

325.  (Miss.)  A  check  stamped  "not 
payable  through  an  express  company"  was 
presented  by  an  express  company  and  the 
drawee  refused  payment,  although  the  funds 
were  sufificient.  The  ex])ress  company  caused 
the  check  to  be  protested.  The  bank  desires 
to  know  whether  by  refusing  payment  it  in- 
curs liability  to  the  drawer  for  damages  or 
whether  payment  was  rightfully  refused. 
Opinion :  The  drawer  cannot  hold  the  drawee 
liable  thereon  in  damages  for  injuring  his 
credit.  The  restriction  is  valid,  does  not 
affect  negotiability,  and  the  check  was  not 
properly  protestable.Vol.  6,  p.  371,  Nov., 
1913. 

326.  (N.  Y.)  Where  the  drawer  of  a 
check  stamps  the  same  "not  payable  through 
an  express  company"  (1)  such  provision  is 
valid  and  does  not  affect  the  negotiability, 
(2)  the  duty  of  the  drawee  is  to  refuse  pay- 
ment when  the  check  is  presented  through  the 
prohibited  agency,  (3)  the  drawee  so  refusing 
would  not  incur  liability  either  to  the  drawer 
or  the  holder,  (4)  the  check  could  not  be  law- 
fully protested  and  the  holder  causing  protest 
would  be  liable  to  the  drawer  in  damages. 
Vol.  9,  p.  902,  May,  1917. 

327.  (S.  Dak.)  The  words  "not  payable 
through  an  express  company"  printed  on  the 
face  of  a  check  are  a  valid  provision,  and  do 
not  affect  the  negotiability  of  the  check,  which 
can  be  presented  through  other  channels. 
Vol.  7,  p.  305,  Nov.,  1914. 

OfHcial  checks  for  private  use 
See  500,  670 

328.  (Conn.)  A  customer  gave  his 
check  drawn  payable  to  a  company  to  the  com- 
pany's agent,  who  liad  the  same  certified  at 
the  bank  before  indorsement.  After  certifi- 
cation the  agent  indorsed  tiie  company's  name 
and  then  his  own  name  individually,  and 
thereupon  John  Jones  also  indorsed  the 
check  and  the  same  was  cashed  for  the  agent 
by  a  bank  where  John  Jones  had  a  personal 
account,  relying  upon  John  Jones's  warranty. 
The  check  was  paid  by  the  drawee,  but  the 
company  did  not  receive  the  amount.  Opin- 
ion: Assuming  the  agent  had  no  authority  to 
indorse  for  the  company,  the  cashing  bank 
which  paid  tiie  check  upon  tiie  unauthorized 
indorsement  is  liable  to  certifying  bank,  and 
can  recover  from  John  Jones  upon  his  in- 
dorsement.    If  the  agent's  indorsement  was 


41 


329 


DIGEST  OF  LEGAL  Oi'INlOXS 


authorized,  the  amount  is  chargeable  against 
the  drawer's  account.  Vol.  7,  p.  4D1,  Jan., 
Iiil5. 

329.  (Ga.)  The  clicck  of  a  corporation 
signed  in  tlie  name  of  tlie  corporation  by  "A, 
Treasurer,''  or  by  A  in  some  otlicr  official 
ca])acity,  given  in  payment  of  a  draft  drawn 
on  A  individually,  would  carry  notice  from 
the  form  of  the  check  and  charge  the  holder 
with  the  duty  of  inquiry  as  to  the  authority  of 
A  to  use  the  corporate  funds  to  pay  his  pri- 
vate debt.     Vol.  5,  p.  168,  Sept.,  1913. 

330.  (111.)  Under  the  existing  condition 
of  the  law,  there  is  some  doubt  whether  the 
drawee  bank  is  safe  in  paying  a  treasurer's 
clicck  to  his  personal  order  without  inquiry. 
It  would  be  safer  for  a  bank  paying  such 
cliecks  to  require  a  resolution  of  the  corpora- 
tion authorizing  the  bank  to  pay  its  checks 
when  made  out  to  the  official's  own  order  or 
to  bearer  as  well  as  to  third  persons.  Vol.  3, 
p.  584,  April,  1911. 

331.  (Mo.)  John  Jones  presented  for 
credit  to  his  individual  account  a  check  for 
$7,000  drawn  on  another  bank  to  his  own 
order  by  himself  as  treasurer  of  a  company. 
The  check  was  indorsed  by  him  in  blank.  It 
afterwards  develops  that  the  treasurer  is  mis- 
appropriating the  company's  funds.  Opin- 
ion: It  has  been  held  by  the  Appellate  Di- 
vision of  the  New  York  Supreme  Court  in  a 
similar  case  that  the  mere  form  of  the  check 
charged  the  bank  of  deposit  with  notice  that 
the  treasurer  was  using  corporate  funds  for 
his  private  purposes  and  made  it  liable  to  the 
corporation  therefor.  Vol.  2,  p.  413,  April, 
1910. 

Note:  The  above  decision  was  subsequently  re- 
versed by  the  New  York  Court  of  Appeals  which 
hold  that  if  it  be  conceded  a  diity  of  inquiry 
rested  upon  the  bank  of  deposit,  such  inquiry  was 
sufficiently  made  and  the  duty  discharged  by  pre- 
sentment to  the  drawee  bank,  and  payment  of  the 
check  was  an  answer  to  the  inquiry. 

332.  (S.  Dak.)  A  check  made  payable 
to  and  owned  by  the  N  Trust  Company  was 
indorsed  in  the  name  of  the  trust  company 
by  its  secretary  to  his  individual  order,  fol- 
lowed by  his  personal  indorsement,  and  then 
was  negotiated  by  him  to  the  P  Banking 
Compan}^,  which  paid  him  part  thereof  in 
currency,  credited  the  balance  to  his  personal 
account  and  thereafter  collected  the  draft. 
Opinion:  The  P  Banking  Company  was  liable 
to  the  N  Trust  Company  for  the  proceeds,  as 
the  indorsement  of  the  secretary  was  without 
express   or   implied   authority   of   the  trust 

company,    and    furthermore    the    collecting 


hank  was  put  on  inquiry  by  the  apparent  ir- 
regularity in  the  form  of  the  transaction. 
Vol.  5,  p.  370,  Dec,  1912. 

Checks  for  less  than  one  dollar 

333.  (Hawaii.)  Checks  in  sums  less 
than  one  dollar,  issued  in  the  regular  course 
of  business  payments,  are  not  prohibited  by 
hiw — Section  178  of  the  United  States  Crim- 
inal Code  of  1909  (substance  of  such  section 
liaving  been  enacted  in  1863)  which  forbids 
the  making  of  a  check  for  a  less  sum  than  one 
dollar  intended  to  circulate  as  money — has 
been  misconstrued,  and  does  not  apply  to 
checks  issued  for  purposes  of  pavment  not  of 
circulation.  Vol.  3,  p.  590,  April,  1911. 
See  article  in  Vol.  2,  p.  152. 

Partnership  checks 

See  487,  488 

334.  (N.  J.)  Upon  death  of  one  part- 
ner, survivor  has  right  to  draw  checks  on 
partnership  account.  Vol.  1,  p.  203,  Dec, 
1908. 

Checks  payable  in  one  state  and  negoti- 
ated in  another 
See  1113,  1148 

335.  (Utah.)  Check  drawn  and  payable 
in  same  state  does  not  become  a  foreign  bill 
because  indorsed  in  another  state  and  protest 
is  not  required  but  optional.  Vol.  3,  p.  585, 
April,  1911. 

336.  (Wyo.)  A  check  dated  at  Sheri- 
dan, Wyoming,  and  drawTi  on  a  bank  of  that 
place  bears  the  indorsement  of  a  bank  out- 
side of  the  state.  It  is  questioned  whether  by 
reason  of  the  indorsement  it  becomes  a  for- 
eign bill  of  exchange  so  as  to  require  protest. 
Opinion:  Notwithstanding  such  indorsement 
the  check  is  an  inland  bill  of  exchange  and 
does  not  require  protest.  Vol.  2,  p.  231,  Dec, 
1909. 

Check  payable  to  A  for  account  of  B 

337.  (Cal.)  A  drawee  bank  paid  a  check 
drawn  payable  to  A,  upon  which  was  written 
"for  the  account  of  B"  or  ''to  be  placed  to 
the  credit  of  B.''  Opinion:  The  drawee  bank 
in  paying  the  check  was  not  charged  with  the 
duty  of  seeing  that  A  applied  the  money  to 
B's  account.  The  bank  was  tmder  no  duty 
to  procure  B's  indorsement  or  to  see  that  B's 
interest  was  protected.  Vol.  7,  p.  689,  March, 
1915. 


42 


CHECKS— PAYMENT  OF 


344 


Check  payable  to  drawee  and  presented 
by  third  person 

338.  (Wis.)  A  customer  drew  a  check  in 
•which  the  drawer  ordered  the  bank  to  pay 
itself,  and  delivered  the  check  to  a  third  per- 
son, "who  presented  it  to  the  bank.  The  bank 
refused  to  pay  without  making  inquiry  from 
the  drawer,  while  the  third  party  contended 
that  the  check  was  in  effect  payable  to  bearer 
and  should  be  paid  without  such  inquiry. 
Opinion:  Under  the  present  condition  of  the 
law,  the  best  course  is  for  the  bank  to  refuse 
to  pay  without  inquiry  as  to  the  authority  of 
the  holder  to  collect  the  money.  Such  check 
is  certainly  not  payable  to  bearer.  Vol. 
S,  p.  511,  Dec,  1915." 

Form  of  payroll  check  to  protect  against 
loss 

339.  (Minn.)  A  concern  carrying  a 
large  payroll  fmds  that  three-fourth  of  its 
payroll  checks  are  cashed  in  saloons  and  de- 
sires a  check  drawn  in  such  a  form  that  the 
employee  must  cash  it  at  the  bank.  Opin- 
ion: A  suggestion  is  made  that  the  check  be 
drawn  payable  to  the. payee  only,  and  on  the 
back  print  a  receipt  for  wages  to  be  signed  by 
the  payee  and  the  signature  witnessed  by  the 
paymaster,  and  under  such  signature  add  an- 
other Ihie  for  the  payee's  indorsement,  which 
lie  must  make  in  the  presence  of  the  bank 
officer  before  payment.  Such  a  system  will 
(1)  safeguard  payor  bank  from  risk  of  iden- 
tification; (2)  relieve  payee  from  risk  of  loss, 
and  (3)  remove  saloon-cashing  evil.  Vol.  7, 
p.  579,  Feb.,  1915. 

Right  to  possession  of  unused  certified 
check 

340.  (Idaho.)  Tlie  customer  of  a  bank 
drew  a  check  of  $250  in  favor  of  the  state 
treasurer,  Avhich  was  certified  by  the  bank's 
assistant  cashier.  A  month  later  the  check, 
never  having  been  used  nor  indorsed,  was  re- 
turned to  the  bank  by  the  customer  with  a 
request  that  the  bank  send  him  a  draft  for 
the  amount.  The  request  was  refused  and 
the  customer  demanded  the  return  of  the 
check.  Opinion:  The  customer  and  not  tiic 
bank  has  a  better  right  to  the  check,  which 
should  be  returned  after  cancellation  of  tiie 
certification.  Vol.  4,  p.  553,  March,  1912. 
See  42,  295. 


Duty  of  care  in  preparing  check 
See   93 

341.  (Iowa.)  It  is  the  duty  of  the 
drawer  to  exercise  ordinary  care  in  preparing 
his  check.  Tlie  question  of  negligence  does 
not  arise  imless  the  depositor  leaves  blanks 
unfilled  or  by  some  affirmative  act  of  negli- 
gence facilitates  fraud.  While  he  may  be 
liable  where  he  draws  the  instrument  in  such 
incomplete  shape  as  to  facilitate  or  invite 
fraudulent  alterations,  he  is  not  bound  to  so 
prepare  the  check  that  nobody  else  can  suc- 
cessfully tamper  with  it.  Xo  judicial  deci- 
sion or  statute  exists  at  the  present  time 
which  would  require  the  drawer  of  a  cheek  to 
use  a  protectograph,  check  punch,  safety 
paper  or  other  protective  device  in  order  to 
absolve  himself  from  the  charge  of  negli- 
gence in  case  the  instrument  were  altered  or 
forged.     Vol.  8,  p.  1016,  May,  1916. 

342.  (Iowa.)  In  the  execution  of  a 
check,  it  is  the  duty  of  the  drawer  to  exercise 
ordinary  care.  A  drawer  does  not  use  ordi- 
nary care  when  he  fills  in  the  amount  of  a 
check  in  the  middle  of  the  line  so  that  a  per- 
son can  prefix  an  increased  amount,  or  when 
he  signs  a  check  in  blank  and  carelessly  leaves 
it  lying  around.  However,  a  drawer  is  not 
responsible  where  he  carelessly  leaves  his 
check-book  around  unsigned.  The  courts 
have  never  yet  held  tliat  banker's  drafts 
must  be  safeguarded  by  a  protectograph,  nor 
that  the  drawing  of  a  check  by  a  customer  in 
lead  pencil  is  negligent.  Vol.  3,  p.  148,  Sept., 
1910. 

343.  (Mass.)  The  amount  of  a  check 
was  not  expressed  in  words  written  in  the  or- 
dinary way  but  in  figures  stamped  by  a 
machine  in  the  body  of  the  instrument. 
Opinion:  The  instrument  is  valid  and  nego- 
tiable, and  the  maker  is  not  negligent  in  so 
drawing  the  check.  Vol.  7,  p.  892,  Mav, 
1915. 

344.  (N.  C.)  A  bank  in  issuing  a  draft 
filled  it  out  in  ])en  and  ink  witii  ordinary 
care,  but  did  not  use  a  protectograph.  The 
draft  was  subseciucntly  fraudulently  raised  to 
an  increased  amount,  perforated  and  negoti- 
ated to  an  innocent  purchaser.  Opinion:  The 
innocent  purchaser  would  have  no  recourse 
upon  the  drawer  except  for  the  original 
amount.  Xo  case  has  gone  to  the  extent  of 
holding  the  amount  must  be  protected  by 
perforation.     Vol.  11,  p.  99,  Aug.,  1918. 


43 


345 


DIGEST  OF  LKOAL  OPINIONS 


Refusal  to  pay  duly  presented  check 

345.  (Wash.)  Exccj)!  in  few  states 
where  check  is  an  assignment,  tlic  holder  of 
a  check  (not  certified)  has  no  right  of  action 
against  the  bank  which  refuses  to  pay  same 
but  sole  recourse  is  upon  drawer  and  prior 
parties.  Vol.  5,  p.  :i:il,  Dec,  11)152.  See 
346. 

Note:  With  tlio  almost  uiiivorsal  onactmcnt  of 
tlie  Negotiable  Instninieiits  Law,  the  rule  that  a 
check,  of  itself,  constitutes  an  assignment  of  the 
deposit  to  the  payee,  disappears. 

Refusal  to  pay  check    with  suspicious 
appearance 

346.  (N.  Y.)  A  check  was  presented 
and  payment  refused  by  the  bank  because  the 
instrument  written  in  indelible  pencil  con- 
tained partly  erased  figures  and  the  writing 
was  obscure.  The  bank  telephoned  the  maker, 
who  stated  that  he  had  not  drawn  the  check. 
The  check  was  protested  and  subsequently 
the  maker  notified  the  bank  that  he  had 
drawn  the  check.  Opinion:  A  bank  is  under 
obligation  to  its  depositor  to  pay  his  properly 
drawn  check  when  duly  presented,  if  the 
funds  are  sufficient,  but  where  the  check 
when  presented  bears  a  suspicious  appearance, 
it  is  the  bank's  duty  to  refuse  to  pay  until  it 
has  had  opportunity  to  make  inquiry  and 
satisfy  itself  as  to  its  genuineness.  The  de- 
scription of  the  check  would  certainly  indi- 
cate a  suspicious  appearance  sufficient  to  put 
the  bank  on  inquiry  and  having  made  in- 
quiry, payment  was  properly  refused.  Vol. 
10,  p.  537,  Jan.,  1918.     See  348. 

Effect  of  remittance  stamp 

347.  (Minn.)  A  customer  issues  checks 
upon  which  has  been  stamped  "The  First 
State  Bank  of  B  will  remit  for  this  check  in 
Eastern  exchange,  without  charge"  and  ques- 
tions whether  the  use  of  this  stamp  would 
make  the  bank  liable  as  upon  certification  or 
simply  convey  the  information  that  the  check 
will  be  paid  at  par.  Opinion:  The  remit- 
tance stamp  having  been  placed  on  the  checks 
before  they  were  issued  would  not  have  the 
effect  of  a  certification.  A  possible  question 
might  arise  whether  the  stamp  affected  the 
negotiability  of  the  check  and  the  words  "if 
desired,"  if  added  would  remove  any  doubt 
thereon.     Vol.  5,  p.  756,  May,  1913. 

Signatures 
See  280,  512  ef  seq.,  561  et  seq. 

348.  (Ariz.)  The  first  letter  of  a  draw- 
er's name,  to  wit  "R,"  was  written  by  another 


and  the  drawer  finished  tiie  signature  in  his 
own  handwriting,  to  wit  "obert  Moore." 
Opinion:  The  drawer  was  bound  by  his  sig- 
nature, Ijut  if  tiie  signature  created  doubt  as 
to  the  genuineness  in  the  mind  of  the  drawee, 
refusal  of  payment  would  be  justified  until 
verification  was  obtained.  Vol.  4,  p.  020, 
April,  1912. 

349.  (111.)  The  signature  of  a  depos- 
itor to  a  check  made  with  a  hectograph  copy, 
if  imprinted  by  the  depositor  or  by  his  author- 
ity, is  valid  and  binding;  but  the  payor  bank 
would  take  the  risk  in  paying  the  check  where 
the  imprint  was  unauthorized,  unless  the  de- 
positor was  negligent  or  agreed  to  not  hold 
the  bank  responsible  in  such  case.  Vol.  8, 
p.  519,  Dec,  1915. 

350.  (D.  C.)  A  bank  would  not  be  li- 
able in  damages  for  refusing  to  pay  a  check 
because  the  signature  does  not  agree  with  the 
one  left  with  the  bank  when  the  account  was 
opened.  Where  signature  on  file  is  "J. 
Brown  Smith"  a  bank  would  be  justified  in 
refusing  to  pay  a  check  signed  "J.  B.  Smith" 
or  "John  B.  Smith,"  even  though  genuine. 
Vol.  4,  p.  682,  May,  1912. 

351.  (S.  C.)  A,  who  had  power  of  at- 
torney from  B  to  sign  checks  for  B,  signed 
B's  name  and  refused  to  sign  his  own  name 
as  attorney  under  B's  name.  Opinion:  The 
signature  of  B's  name  without  adding  "per 
A  attorney"  is  sufficient,  although  bank 
would  probably  have  a  right  to  insist  upon 
the  attorney's  name  being  added.  Vol.  5,  p, 
760,  May,  1913. 

Stale  checks 

See  1105  et  seq 

352.  (Ariz.)  A  check  dat^d  October  10, 
1911,  was  presented  for  pa^Tnent  June  25, 
1913.  The  drawee  refused  payment  on  the 
ground  that  the  check  was  "stale."  Opin- 
ion: The  bank's  refusal  was  justified.  Until 
the  "reasonable  time"  rule  of  the  Negotiable 
Instruments  Law  is  more  fully  interpreted 
the  exact  period  of  time  required  to  make  a 
check  stale  remains  uncertain.  Vol.  6,  p. 
207,  Sept.,  1913. 

Stamping  check  "Paid" 

For  stamping  check  "payment  stopped," 
See  1259  et  seq 

353  (Neb.)  A  collecting  bank  stamps 
checks  "Paid"  and  receives  payment  from  the 
drawee.  The  question  arises  as  to  the  re- 
sponsibility of  the  stamping  bank  in  cases  of 


44 


CHECKS— PAYMENT  OF 


[361 


forged  or  unauthorized  indorsements.  Opin- 
ion: In  the  event  the  checks  have  been  in- 
dorsed "for  collection"  or  otherwise  restrict- 
ively  indorsed  so  as  to  indicate  that  the  col- 
lecting bank  is  an  agent  and  not  an  owner, 
the  "Paid"  stamp  would  not  be  sulTicient 
and  the  drawee  should  require  an  express 
guaranty  of  genuineness  for  its  protection. 
Vol.  4,  p.  302,  Nov.,  1911.     See  300. 

354.  (S.  Dak.)  A  l)ank  receiving  pay- 
ment of  a  check  stamped  the  same  "Paid ;" 
the  drawee  bank  which  paid  the  check  ob- 
jected to  such  stamp  and  questioned  the  au- 
thority of  the  presenting  bank  to  place  it  pn 
the  check.  Opinion:  The  stamping  of  the  word 
"Paid"  would  seem  to  come  within  the  rights 
of  the  presenting  bank  and  drawee's  re- 
fusal to  pay  because  of  objectionable  stamp 
would  prol)ably  be  held  unjustifiable.  Vol. 
6,  p.  755,  May,  1914. 

Check  issued  to  stranger  payee 

Sec   ')'u    ct  scq 

355.  (111.)  A  person  claiming  to  be  the 
payee  of  a  cashier's  check  presents  the  same  to 
the  bank,  properly  indorsed,  without  proof  of 
his  identity  and  requests  the  issue  of  two 
checks  to  the  same  payee  in  lieu  thereof.  The 
bank  seeks  to  know  whether  it  can  safely  com- 
ply. Opinion:  The  bank  in  the  absence  of 
suspicious  circumstances  may  rely  on  the  pre- 
sumption that  the  holder  is  rightfully  en- 
titled thereto,  and  may  issue  the  substitute 
checks  to  the  same  payee,  without  lial)ility 
thereon  in  the  event  the  stranger  is  not  the 
true  payee  and  negotiates  such  checks  upon 
indorsement  of  the  name  of  the  payee.  Should 
the  holder  prove  an  impostor  and  if  the  in- 
dorsement of  the  original  check  proved  a  for- 
gery, the  bank  would,  of  course,  be  liable  to 
the  true  payee  of  the  original  ])ut  would  not 
be  liable  upon  forged  indorsements  of  the 
substitute  checks.  Vol.  10,  p.  308.,  Oct., 
1917. 

Undated  checks 

356.  (Ga.)  A  check,  though  not  dated, 
is  a  valid  and  negotiable  order  on  the  bank  to 
pay  on  demand,  but  the  absence  of  date  may 
(although  the  point  has  not  been  decided) 
afford  justification  f(U'  drawee's  refusal  to  pay 
until  reasonable  time  for  inquiry  as  to  age  of 
check,  for.  if  check  has  been  outstanding  an 
unreasonable  length  of  time,  pavment  is  at 
bank's  peril.     Vol.  7,  p.  98,  Aug.,  1914. 

357.  (N.  Y.)  An  undated  check  is  pre- 
sented through  the  clearing  house,  and  the 


bank  inquires  as  to  its  rights  in  paying  same. 
Opinion:  An  undated  check  is  valid  and  ne- 
gotiable under  the  Negotiable  Instruments 
Law,  provided  it  is  all  right  in  other  respects, 
and  should  be  paid  upon  presentment.  Vol. 
5,  p.  241,  Oct.,  1912. 

358.  (N.  Y.)  A  check  is  presented  for 
I)ayment,  not  bearing  any  date.  The  bank 
questions  whether  the  check  should  be  paid 
upon  presentation.  Opinion:  Under  the  Ne- 
gotiable Instruments  Law  "the  validity  and 
negotiable  character  of  an  instrument  are  not 
affected  by  the  fact  that  it  is  not  dated." 
The  undated  check  being  a  valid  order  to  pay 
on  demand  can  be  paid  l)y  the  bank  upon  pre- 
sentation. Vol.  3,  p.  402,  Jan.,  1911.  See 
1144. 

Return  of  cancelled  vouchers  wathout 
receipt  unsafe 

359.  (Ore.)  Under  the  statement  (new) 
system  as  distinguished  from  the  pass-book 
(old)  S3'stem  the  pass-book  is  simply  used 
for  the  entry  of  deposits,  and  the  cancelled 
vouchers  with  tbe  list  of  amounts  thereof 
showing  total  and  balance  are  returned  to  the 
depositor  without  any  entry  in  the  pass-book, 
the  depositor  receipting  for  the  same.  Any 
bank  which  adopts  this  system  would  be  un- 
safe in  mailing  or  otherwise  parting  with 
possession  of  the  cancelled  vouchers  before  it 
obtains  a  receipt  therefor.  It  would  not  be 
an  impracticable  method  for  a  bank  to  make 
a  monthly  statement  and  mail  a  notice  to  its 
depositor  to  call  and  receipt  for  the  same  with 
cancelled  vouchers.  Vol.  6,  p.  268,  Oct., 
1913. 

Effect  of  provision  "with  exchange" 

S.'(_'    1004.    1(»()1 

360.  (Iowa.)  A  check  drawn  and  pay- 
able at  the  same  place  contained  the  words 
"with  exchange.''  The  last  indorser  at- 
tempted to  collect  10  cents  exchange  in  addi- 
tion to  the  face  amount  of  the  check.  Opin- 
ion: The  words  "with  exchange"  have  no  ef- 
fect as  in  this  case  there  could  be  no  exchange. 
Vol.  4,  p.  430,  .Tan.,  1912. 

361.  (Neb.)  Where  a  check  is  drawn 
and  payable  at  one  and  the  same  place,  the 
words  "with  excliange"  tberein  are  without 
elToet  and  meaningless.  Where  A  in  New 
York  draws  his  check  on  his  bank  in  New 
York  "with  exchange"  and  mails  it  to  a 
payee  in  Omaha,  Nebraska,  it  is  presumably 
the  drawer's  intention  that  the  New  York 
bank  should  pay  the  exchange  on  Omaha  so 


45 


3G2J 


DIGEST  OF  LEGAL  OPINIONS 


that  tlie  payee  might  receive  the  face  amount; 
but  to  carry  out  that  intention  tlie  check 
slioukl  specifically  provide  "with  exchange  on 
Omaha."     Vol.  5,  p.  411,  Jan.,  1913. 

362.  (S.  Dak.)  Where  check  is  drawn 
merely  "with  exchange"  without  specifying 
exchange  on  another  place,  face  of  check  is 
proper  sum  payable.  Vol.  4,  p.  491,  Feb., 
1912. 

Words  and  figures  differ 

363.  (Ind.)  A  check  is  presented  at  a 
bank  drawn  for  $12  so  stated  in  writing  in 
the  body  of  the  instrument,  but  the  marginal 
figures  are  stated  $10.50.  The  bank  teller 
in  cashing  the  check  paid  out  $1G.50. 
Opinion:  The  sum  payable  on  the  check  was 
$12,  The  Negotiable  Instruments  Act  pro- 
vides in  part:  "Where  the  sum  payable  is 
expressed  in  words  and  also  in  figures,  and 
there  is  a  discrepancy  between  the  two,  the 
sum  denoted  by  the  words  is  the  sum  payable ; 
but  if  the  words  are  ambiguous  or  uncertain, 
reference  may  be  had  to  the  figures  to  fix  the 
amount."     Vol.  11,  p.  390,  Jan.,  1919. 

364.  (Okla.)  A  check  w^as  drawn  for 
the  written  amount  of  eighty  dollars,  but  the 
marginal  figures  are  $8.00  and  the  words 
"not  over  ten  dollars"  were  stamped  thereon. 
The  instrument  w^as  negotiated  for  eighty 
dollars,  and  that  amount  paid  by  the  drawee. 
The  drawer  refused  to  be  charged  with  the 
eighty  dollars.     Opinion:  While  no  positive 


conclusion  can  be  arrived  at  as  to  whether 
the  drawee  can  charge  the  full  amount  to  the 
drawer's  account,  it  seems  probable  that  the 
words  "not  over  ten  dollars"  would  be  notice 
to  the  drawee  and  protect  the  depositor.  If 
the  drawee  were  held  responsil>le,  it  is  prol)- 
able  that  it  would  have  a  right  to  recover  the 
excess  from  the  bank  receiving  payment. 
Vol.  G,  p.  685,  April,  1914. 

365.  (S.  C.)  A  bank  refused  to  pay  its 
customer's  check,  which  was  written  for  "two 
dollars"  but  which  contained  the  marginal 
figures  of  "$200,"  the  credit  balance  of  the 
customer  being  $190.  The  drawer  threat- 
ened to  sue  the  bank,  although  the  latter  had 
tendered  the  $2  to  the  holder  on  the  same  day 
the  check  was  presented,  which  tender  was 
refused  by  request  of  the  drawer.  Opinion: 
AAHiere  there  is  a  discrepancy  between  the 
words  and  figures,  the  words  control,  but 
the  court  may  justify  the  bank's  refusal  to 
honor  the  check  because  the  figures  are  an 
index  of  the  sum  payable  in  the  body  and 
contributed  to  mislead  the  bank.  Nominal 
damages  at"  most  might  be  awarded  the  cus- 
tomer.    Vol.  6,  p.  757,  May,  1914. 

366.  (Wyo.)  A  check  was  presented 
for  payment  in  which  the  figures  read 
$181.50  and  the  body  of  the  check  read  One 
Eighty  One  and  50-100,  the  hundred  being 
omitted.  Opinion:  It  would  be  safe  for  a 
bank  to  pay  $181.50,  because  where  the  words 
are  ambiguous,  reference  may  be  had  to  the 
figures.     Vol.  4,  p.  426,  Jan.',  1912. 


COLLECTION 


Bill  of  lading  draft 
See  136  et  seq,  247,  254 

367.  (La.)  A  bank  through  error 
mailed  a  draft  and  an  indorsed  order  bill  of 
lading  to  the  consignee.  The  consignee  ob- 
tained the  goods  upon  the  bill  of  lading  w'ith- 
out  paying  for  the  draft.  Opinion:  The 
bank  is  liable  to  its  customer  for  the  amount 
of  the  draft  on  the  ground  of  negligence. 
Vol.  4,  p.  556,  March,  1912. 

368.  (N.  Y.)  A  bank  received  from  a 
firm  for  collection  a  draft  with  a  bill  of  lading 
for  a  motor  cycle  attached.  The  firm  by 
letter  agreed  with  its  customer  that  the  ma- 
chine would  be  shipped  subject  to  examina- 
tion, but  the  bill  of  lading  was  silent  on  this 
point.  KnoAving  that  this  condition  ex- 
isted, the  bank  on  receipt  of  the  customer's 


deposit  for  the  amount  of  the  draft  surrend- 
ered the  bill  of  lading.  The  customer  pre- 
sented the  bill  of  lading,  received  and  tried 
the  machine,  but  being  dissatisfied  there- 
with returned  it  to  the  freight  office  and 
received  a  new  bill  of  lading.  This  he  at- 
tached to  the  draft  and  returning  same  to 
the  bank  was  repaid  his  deposit.  The  firm 
lost  the  sale.  Opinion:  The  collecting  bank 
is  not  liable  for  any  neglect  of  duty.  It  had, 
in  the  absence  of  contrary  instructions,  a 
right  to  rely  on  the  letter  of  the  firm  permit- 
ting inspection  as  evidencing  the  agreement 
between  seller  and  prospective  buyer,  and  to 
construe  this  permission  as  extendmg  to  an 
actual  test  and  for  that  purpose  to  surrender 
the  bill  of  lading,  safeguarding  its  principal 
by  requiring  a  conditional  deposit  to  be  re- 
funded if  the  machine  proved  unsatisfactory. 


46 


COLLECTION 


375 


Such  deposit  was  not  a  payment  of  the  pur- 
chase price,  the  surrender  of  which  would 
have  made  the  bank  responsible.  Vol.  5,  p. 
101,  Aug.,  1U12.     See  250. 

369.  (Tex.)  A  bank  receives  for  col- 
lection a  draft  to  which  is  attached  a  bill  of 
lading  which  allows  inspection.  The  car  has 
not  yet  arrived.  The  bank  questions  whether 
it  shall  hold  for  arrival  of  car  or  protest  im- 
mediately. Opinion:  The  better  practice  is 
to  hold  the  draft  for  a  reasonable  time  before 
presentment  to  permit  of  arrival  and  inspec- 
tion.    Vol.  4,  p.  557,  March,  1912. 

Circuitous  routing 

370.  (Mont.)  A  city  in  southern  Mon- 
tana is  a  conmiercial  center  for  points  along 
two  forks  of  a  railroad  running  from  there 
south  into  Wyoming.  A  bank  at  the  south- 
ern end  of  one  of  these  forks  holds  a  check 
on  a  town  along  the  same  line,  a  little  distance 
to  the  north.  Instead  of  sending  direct  to 
the  town  of  the  drawee,  the  check  is  for- 
Avardcd  to  the  central  clearing  point  in  south- 
ern Montana.  The  question  arises  whether 
this  is  reasonable  diligence.  Opinion:  Such 
circuitous  method  of  presentment,  although 
declared  negligent  in  some  early  cases,  has 
been  held  reasonable  diligence  by  one  court 
under  the  Negotiable  Instruments  Act.  A 
special  state  statute  legalizing  the  customary 
mode  of  presentment  through  bank  corres- 
pondents is  desirable  in  the  interest  of  cer- 
tainty.    Vol.  2,  p.  105,  Sept.,  1909. 

371.  (Pa.)  ^Yhe^e  a  bank  in  Baltimore, 
holding  for  collection  a  check  on  an  interior 
city  in  Pennsylvania,  mails  same  to  its  Pitts- 
burgh correspondent  and  the  latter  after 
making  the  collection  defaults  as  to  the  pro- 
ceeds, the  routing  through  Pittsburgh  instead 
of  direct  to  an  agent  in  the  city  of  the  drawee 
is  not  negligent.     Vol.  6,  p.  209,  Sept.,  1913. 

372.  (S.  Dak.)  A  bank  in  South  Da- 
kota receives  from  the  payee  a  check  drawn 
on  a  bank  eighteen  miles  distant.  Instead  of 
forwarding  direct  to  a  bank  in  the  drawee's 
town,  the  collecting  bank  mails  the  check  to 
its  Chicago  correspondent  and  it  reaches  the 
drawee  by  a  circuitous  route.  Payment  was 
refused  and  the  notice  of  dishonor  docs  not 
reach  the  payee  until  live  days  after  the  payee 
delivered  the  check.  Did  the  collecting  l)ank 
exercise  due  diligence?  Opinion:  Under 
the  state  statute  which  defines  due  diligence 
in  making  collections,  the  collecting  bank 
did  in  this  case  exercise  due  diligence  in 
adopting  such  method  of  presentment.     The 


payee  is  responsible  as  indorser.     Vol.  3,  p. 
144,  Sept.,  1910. 

Selection  of  correspondent 

373.  (Ind.)  A  check  drawn  by  B  on  a 
bank  in  South  Dakota  was  deposited  by  the 
payee  M  in  an  Indiana  bank,  and  was  for- 
warded to  a  Louisville,  Kentucky  bank, 
thence  to  a  Chicago  bank,  thence  to  a  central 
South  Dakota  bank,  which  forwarded  it  to 
another  South  Dakota  bank  at  the  place  of 
the  drawee.  The  drawee  paid  the  check  and 
charged  it  to  the  accoimt  of  the  drawer  and 
the  collecting  South  Dakota  bank  remitted 
therefor  by  its  draft,  which  was  not  paid  be- 
cause of  the  failure  of  such  bank.  Opinion: 
In  case  of  loss,  it  would  fall  upon  the  payee 
j\I,  the  owner  of  the  check,  and  not  upon  any 
of  the  banks  which  handled  the  check  for  col- 
lection. The  authorities  of  Indiana,  Ken- 
tucky, Illinois  and  South  Dakota  hold  that 
the  collecting  bank  is  not  responsible,  pro- 
vided it  uses  due  diligence  in  selecting  a  suit- 
able correspondent.  In  South  Dakota  the 
payee  M  would  have  a  preferred  claim  against 
the  receiver.     Vol.  4,  p.  554,  March,  1912. 

374.  (Miss.)  In  ^Mississippi  the  bank 
undertaking  the  collection  of  paper  merely 
undertakes  to  use  due  care  in  selecting  a  sub- 
agent  and  in  transmitting  the  paper,  and  is 
not  responsible  for  the  defaults  of  corres- 
pondents, if  duly  selected,  who  arc  not  its 
agents  but  the  sub-agents  of  the  owner  of  the 
paper.     Vol.  6,  p.  90,  Aug.,  1913. 

375.  (Wis.)  An  item  is  entrusted  for 
collection  by  bank  No.  1  to  bank  No.  2  and 
by  the  latter  to  bank  No.  3,  and  there  is  a 
loss  caused  by  the  negligence  of  bank  No.  3. 
The  question  is  asked  whether  bank  No.  1 
can  hold  bank  No.  2,  which  has  not  been  neg- 
ligent, or  must  look  to  bank  No.  3  with  which 
it  has  had  no  direct  dealings.  Opinion:  In 
some  states  a  l)ank  undertaking  a  distant  col- 
lection is  an  independent  contractor  liable 
for  the  defaults  of  the  correspondents  wliom 
it  selects,  unless  such  liability  is  changed  by 
agreement,  while  in  other  states,  including 
Wisconsin,  such  bank  merely  undertakes  to 
use  due  care  in  selecting  a  sub-agent  and  in 
transmitting  the  paper,  and  is  not  responsible 
for  the  acts  or  defaults  of  the  latter.  In 
Wisconsin  bank  No.  1  would  have  to  look  di- 
rectly to  l)ank  No.  3,  which  under  such  rule 
is  its  sub-agent.  It  is  quite  customary  for 
banks  in  states  where  tlie  rule  first  stated 
prevails,  to  change  tiieir  legal  liability  in  this 
regard  by  notices  or  contracts  printed  on  their 
literature  to  the  effect  that  in  receiving  out- 


47 


376 


DIGEST  OF  LE(JAL  OPINIONS 


of-to\vn  items  they  act  as  a^ent  only  and  dis- 
(;laiin  iesponsil)ility  for  acts  and  defaults  of 
correspondents  wliere  didy  sele(;ted.     Vol.  11, 

p.  (;:;},  June,  i!)r.>. 

Liability  for  default  of  correspondent 

376.  (Ala.)  A  l)ank  in  Alabama  casliiM' 
for  its  customer  a  draft  drawn  on  a  hank  in 
Florida  and  forwarded  the  item  to  A,  its  cor- 
respondent, for  collection.  A  forwarded  to 
its  correspondent  hank  B,  which  collected 
from  the  drawee  and  failed  before  its  draft 
in  remittance  could  he  paid.  Opinion:  Bank 
A,  whether  located  in  Alabama  or  Florida 
(the  location  not  being  given),  is  not  respon- 
sible for  the  default  of  Jiank  B,  provided  B 
is  a  duly  selected  correspondent,  because 
under  the  law  of  both  states  a  collecting  bank 
is  not  responsible  for  the  default  of  sub- 
agents.  If  the  Alabama  bank  received  the 
check  as  agent  for  collection,  it  can  charge 
the  amount  back  to  its  customer's  account. 
The  authorities  conflict  on  the  question 
whetlier  the  holder  of  B's  dishonored  draft  in 
remittance  has  a  preferred  claim  against  B's 
receiver.     Vol.  7,  p.  218,  Oct.,  1914. 

377.  (Conn.)  A  bank  in  Connecticut 
received  as  collecting  agent  a  check  on  a  bank 
in  Tennessee,  which  it  forwarded  to  its  cor- 
respondent, a  Philadelphia  bank.  The  cor- 
respondent in  turn  forwarded  the  item  to  its 
correspondent,  the  C  bank,  which  collected 
from  the  drawee.  Afterwards  the  C  bank 
failed  and  its  draft  in  favor  of  the  Philadel- 
phia bank  Avas  protested.  Opinion:  In  Penn- 
sylvania and  Connecticut  the  collecting  bank 
is  not  liable  for  the  correspondent's  default, 
if  duly  selected.  The  owner  of  the  check 
probably  has  a  preferred  claim  against  the 
failed  bank.     Vol.  6,  p.  685,  April,  1914. 

378.  (Miss.)  A  bank  in  Mississippi  re- 
ceived for  collection  a  check  drawn  on  a  bank 
in  Louisiana.  The  check  was  sent  to  the 
Bank  of  C  of  New  Orleans,  which  in  turn 
sent  the  item  to  the  bank  of  D.  The  bank  of 
D  failed  after  it  had  collected  of  the  drawee. 
Opinion:  Under  the  Mississippi  law  the  Miss- 
issippi bank,  taking  the  check  not  as  owner 
but  as  a  collecting  agent,  is  not  responsible  for 
the  loss  occasioned  by  the  failure  of  the  D 
bank,  and  it  can  charge  its  depositors  ac- 
count. Under  the  Louisiana  law  the  depos- 
itor can  collect  from  the  C  bank,  wdiich  is 
liable  for  the  default  of  its  correspondent, 
the  D  bank.     Vol.  6,  p.  433,  Dec,  1913. 

379.  (N.  J.)  The  bank  of  A  in  New 
Jersey  received  for  collection  a  clieck  drawn 


on  a  bank  in  Arkansas.  The  check  was  sent 
to  B  bank  of  Philadelphia,  which  in  turn 
sent  it  to  its  correspondent  in  St.  Louis.  The 
St.  Louis  bank  forwarded  it  to  tiie  bank  of 
C,  which  collected  the  amount  of  the  drawee 
and  later  failed.  Opinion:  In  New  Jersey 
the  hanlv  of  A  is  liable  for  default  of  corres- 
])ond('nt.  As  no  such  liability  exists  in 
Pennsylvania  and  Missouri,  the  sole  redress 
of  the  bank  of  A  is  against  the  failed  bank. 
Vol.  6,  p.  511,  Jan.,  1914. 

380.  (N.  M.)  A  bank  receiving  a  check 
for  collection  forwarded  the  same  to  its  cor- 
respondent, the  X  bank  of  El  Paso,  Texas. 
The  Texas  bank  forwarded  the  item  to  its 
correspondent,  which  collected  from  the 
drawee  and  failed  before  remitting.  Opin- 
ion: In  Texas  tlie  El  Paso  bank  is  liable  for 
the  default  of  its  correspondent,  in  the  ab- 
sence of  an  agreement  relieving  it  from  such 
liability.  In  no  event  is  the  drawee  which 
paid  the  check  responsible.  Decisions  of 
other  states  conflict.  Vol.  4,  p.  554,  March, 
1912. 

381.  (Okla.)  A  check  drawn  on  the  H 
bank  of  Texas  was  deposited  by  the  payee 
in  an  Oklahoma  bank  and  was  forwarded  to 
the  M  bank  of  Texas,  thence  to  the  F  bank  of 
Texas,  thence  to  the  C  bank  of  Texas,  which 
forwarded  it  to  another  Texas  bank  at  the 
place  of  the  drawee.  The  drawee  paid  the 
check  and  charged  the  account  of  the  drawer, 
and  the  collecting  Texas  bank  remitted  there- 
for its  draft,  but  failed  while  the  said  draft 
was  in  transit.  Opinion:  Under  the  Texas 
decisions  a  bank  is  liable  for  the  default  of 
its  correspondent  and  the  loss  would  fall  upon 
the  C  bank,  unless  it  had  protected  itself  from 
such  default  by  an  agreement.  Assuming 
all  of  the  Texas  banks  were  thus  protected, 
the  question  of  responsibility  for  the  loss 
would  arise  between  the  Oklahoma  bank  and 
the  pa3-ee.  Until  the  Oklahoma  courts  adopt 
either  the  rule  that  the  collecting  bank  is 
liable  for  correspondents'  defaults,  or  not 
liable  if  a  suitable  correspondent  is  selected, 
the  question  is  uncertain.  Vol.  4,  p.  G12, 
April,  1912. 

382.  (Tex.)  A  bank  in  Texas  received 
from  its  customer  an  out-of-town  check  for 
collection.  The  check  was  forwarded  by  it 
to  a  bank  in  Fort  \Yorth,  Texas,  and  by  it  to 
the  E  bank  which  in  turn  presented  the  in- 
strument and  received  payment  from  the 
drawee.  Before  remitting  the  proceeds  to 
the  Fort  Worth  bank  the  E  bank  failed.  On 
whom  should  the  loss  fall?  Opinion:  Lender 
the  law  of  Texas,  a  bank  receiving  an  out-of- 


48 


COLLECTION 


389 


town  check  for  collection  is  an  independent 
contractor  and  is  liable  to  its  principal  for  the 
defaults  of  subsequent  banks  to  whom  the 
item  is  forwarded,  unless,  by  stipulation,  it 
relieves  itself  from  such  liability.  Vol.  10, 
p.  47,  July,  1917. 

383.  (Tex.)     In  Texas  a  bank  receiving 

a  draft  for  collection  at  a  distant  point  is  re- 
sponsible for  the  default  of  the  correspond- 
ent. Said  collecting  bank  is  treated  as  an 
independent  contractor  and  the  subsequent 
agents  as  its  own  and  not  the  sub-agents  of 
the  owner.     Vol.  5,  p.  379,  Dec,  1912. 

Disclaimer  of  liability  for  negligence 

See  399 

384.  (Mo.)  The  validity  of  an  agree- 
ment, contained  on  a  credit  advice  card  and 
remittance  letter,  that  "when  instructions  to 
the  contrary  are  not  given,  items  may  be 
sent  to  the  banks  upon  which  they  are  drawn" 
as  relieving  the  sending  bank  from  respon- 
sibility for  loss  through  the  failure  of  the 
drawee  presents  an  unsettled  question  upon 
which  the  courts  take  different  views.  Vol. 
4,  p.  432,  Jan.,  1912. 

Note:  The  Missouri  legislature  in  1919  passed 
a  law  providing  that  the  forwarding  of  items 
direct  to  the  payor  shall  be  deemed  due  diligence. 

385.  (Ore.)  A  bank  submits  a  form  of 
agreement  to  be  signed  by  depositors,  author- 
izing the  collecting  bank  to  mail  checks  direct 
to  the  drawee  where  there  is  only  one  bank 
in  the  place.     The  agreement  is  as  follows : 

"Astoria,   Oregon 

To  the  First  National  Bank  of  Astoria : 
Having  deposited  with  you  a  check  drawn 

by on at 

for  $ ,  and  there  being  no  other  bank 

in  the  said  town  to  which  you  can  send  this 
cheek  for  collection,  you  are  instructed  to 
send  it  direct  to  the  bank  on  which  it  is 
drawn,  and  I  assume  all  responsibility  for 
any  failure  on  your  part  to  receive  full  and 
final  payment  from  the  said  bank,  either  by 
failure  of  said  bank  to  make  returns  or  by  the 
return  of  a  draft  which  you  are  unable  to 
collect."  Opinion:  In  view  of  the  numer- 
ous decisions  which  hold  sending  to  the 
drawee  negligent,  such  agreement  might 
possibly  be  held  to  contravene  public  policy 
as  a  stipulation  by  the  bank  to  be  relieved  of 
its  own  negligence,  but  this  would  be  an  ex- 
treme position  in  view  of  the  fact  that  some 
courts  justify  such  method  of  collection  and 
the  agreement  would  probably  be  held  valid. 
Vol.  2,  p.  108,  Sept.,  1909. 


XoTE:  Tlie  Oregon  legi>latur.'  in  1919  passed  a 
law  providing  tiiat  the  forwarding  of  items  direct 
to  tlie  i)ayor  sliall  be  deemed  due  diligence  . 

Duty  of  collecting  bank 

S.-e   1097,   1118,  1119 

386.  (Ala.)  A  bank  received  for  collec- 
tion a  check  on  which  payment  was  refused 
because  not  properly  indorsed.  The  bank 
returned  the  check  for  correction  and  in- 
quired as  to  its  liability  for  failure  to  request 
certification,  should  the  check  afterwards  be 
protested  for  lack  of  sufficient  funds.  Opin- 
ion: It  is  not  unlikely  that  the  courts  might 
hold  that  due  diligence  requires  that  the 
collecting  bank  request  certification  before 
returning  the  check  for  correction,  for  such 
would  seem  the  action  a  discreet  person 
would  take  in  his  own  interest  in  an  attempt 
to  insure  ultimate  payment.  Although  the 
pa^'or  bank  is  not  obliged  to  certify,  certifica- 
tion in  such  case  is  a  common  practice.  The 
courts  have  not  yet  passed  upon  the  precise 
question  whether  it  is  the  duty  of  a  collecting 
bank  to  request  certification  of  an  improperly 
indorsed  check  before  returning  same  for  cor- 
rection.    Vol.  7,  p.  33,  July,  1914. 

387.  (Cal.)  A  check  drawn  by  A  in 
favor  of  himself  but  not  bearing  his  in- 
dorsement, was  forwarded  by  B  bank  to  a 
correspondent  bank,  which  returned  the  item 
to  B  bank  for  indorsement,  without  first 
forwarding  for  payment  by  the  drawee. 
Opinion:  The  action  of  the  bank  as  collection 
agent  was  proper.     Vol.  5,  ]i.  100,  Aug.,  1912. 

388.  (Conn.)  Bank  A  received  a  time 
draft  drawn  on  a  party  in  the  same  state. 
The  item  was  forwarded  to  its  correspondent 
Bank  B,  which  in  turn  forwarded  it  to  its  cor- 
respondent Bank  C,  located  in  the  same  place 
as  the  drawee.  Bank  C  held  the  draft  fifteen 
days  without  presenting  it  for  acceptance,  but 
l)rescnted  it  for  payment  at  maturity,  when 
j)ayment  was  refused.  Opinion:  The  collect- 
ing bank  must  present  a  time  draft  for  accep- 
tance when  received  and  is  negligent  if  it 
waits  until  maturitv  and  merelv  presents  the 
draft  for  pavment".  Vol.  8,  p.  708.  Feb., 
1916. 

389.  (Kan.)  A  collecting  bank  for- 
warded a  siglit  draft  delivered  in  Kansas  upon 
a  bank  in  Missouri  to  its  correspondent, 
whicli  ]>rcsented  the  same  to  the  drawee.  In 
the  meantime  the  drawer  hurried  home  and 
stopped  })ayment  and  the  draft  was  protested 
and  returned.  Opinion:  The  l)ank  used  due 
diligence  when  it  forwarded  the  draft  in  the 
usual  course,  and  its  customer  has  no  reason 


49 


390 


DIGEST  OF  LECJAL  Oi'lMOXS 


lo  C()mi>laiii.  In  tlic  nhsoiice  of  some  special 
reason  or  instruction  given  the  collecting 
hank,  it  was  not  inciuni)ent  iii)on  it  in  the  ex- 
ercise of  due  diligence  to  attempt  to  ])rocure 
acceptance  hy  telegram.  Vol.  4,  p.  555, 
March,  1912. 

390.  (N.  M.)  A  Texas  hank  receiving 
a  note  for  collection  forwarded  it  to  a  hank  in 
Utah,  with  specific  instructions  to  have  tlie 
instrument  collected  hy  that  hank's  attorney. 
The  Utah  hank  held  the  note  for  four  months 
hefore  returning  the  same  uncollected.  0pm- 
ion:  The  Utah  hank,  having  undertaken  the 
collection,  must  use  reasouahle  diligence,  and 
its  retention  of  the  note  for  four  months 
without  advising  the  Texas  hank  is  itself  a 
negligent  act.  If  it  can  he  proved  that  the 
del)tor  could  have  heen  forced  to  pay  by 
])rompt  action,  but  has  since  become  insolvent, 
the  Utah  bank  is  liable  for  the  amount  of 
damages  proved.     Vol.  8,  p.  911,  April,  1916. 

Express  company  as  collecting  agent 

391.  (Ala.)  A  collecting  bank  forwards 
items  by  express  for  collection  wdiich  it  has 
been  instructed  to  have  protested  in  the  event 
of  non-payment ;  the  bank  knows  that  the  ex- 
press company  does  not  undertake  to  have  the 
items  protested.  Opinion:  The  company  is 
not  a  suitable  agent  for  collection  of  protest- 
able  items  and  the  bank  is  negligent  in  select- 
ing such  agent.     Vol.  4,  p.  218,  Oct.,  1911. 

392.  (Tenn.)  The  Interstate  Commerce 
Commission  has  not  ruled  that  express  com- 
panies have  no  right  to  make  collections.  A 
drawer  has  a  right  to  insert  words  in  his  check 
restricting  the  collection  through  specified 
channels,  as  for  example  "Not  valid  if  paid 
through  the  Y  Express  Company."  Vol.  3, 
p.  674,  May,  1911.     See  325,  326,  327. 

Following   instructions 

393.  (Ala.)  Where  a  bank  holds  for  col- 
lection checks  upon  itself  without  a  deposit 
against  the  same  and  receives  a  specific  de- 
posit from  its  customer  to  he  paid  upon  a 
later  described  check,  its  duty  is  to  obey  the 
instructions  and  in  so  doing  it  incurs  no  lia- 
bility to  the  owners  of  the  checks  which  it 
holds  for  collection.  Where  several  checks 
are  received  any  one  of  which  would  be  an 
overdraft,  the  bank  if  it  chooses  can  pay  an 
overdraft  and  apply  a  future  deposit  thereto. 
Vol.  8,  p.  909,  April,  1916. 

394.  (Cal.)  A  bank  in  California  for- 
warded to  another  bank  in  the  same  state  a 


note  payable  in  Iowa,  which  had  matured 
nearly  ten  years  previously,  with  instructions 
lo  collect,  obtain  a  new  note,  or  place  in  the 
hands  of  an  attorney,  and  failing  in  any  of 
the  foregoing,  to  return  the  note  within  ten 
days  of  its  receipt.  The  collecting  bank 
undertook  the  collection  hut  neglected  to 
follow  the  instructions,  and  returned  the  note 
after  it  became  outlawed,  to  the  owner's  dam- 
age. Opinion:  The  bank  is  liable  for  such 
damages  as  were  caused  by  its  neglect  of  duty. 
The  owner  lost  his  remedy  at  law  and  his 
prima  facie  damages  are  the  full  amount  of 
the  note.     Vol.  5,  p.  664,  April,  1913. 

395.  (Kan.)  A  bank  forwarded  to  its 
correspondent  a  draft  with  the  following  in- 
structions :  "This  item  is  payable  on  presenta- 
tion and  is  not  to  be  held  for  arrival  of  goods, 
for  the  convenience  of  the  drawee  or  for  any 
other  reason.  If  not  paid  on  presentation 
protest  and  return  immediately,  advising  by 
telegraph.  Our  customer  will  hold  the  col- 
lecting bank  strictly  accountable  for  failure 
to  follow  the  foregoing  instructions."  The 
item  was  properly  protested  and  handled  in 
accordance  with  instructions,  except  that  the 
bank  failed  to  wire  the  protest.  Had  the 
sending  bank  paid  out  money  in  the  trans- 
action, would  the  collecting  bank  have  been 
liable  ?  Opinion :  A  bank  acting  as  agent  for 
collection  is  under  duty  to  follow  special  in- 
structions with  regard  to  the  collection  and 
for  any  neglect  to  follow  instructions,  from 
which  damage  results,  it  will  be  liable  to  its 
principal.     Vol.  11,  p.  166,  Sept.,  1918. 

396.  (Pa.)  A  bank  received  three  in- 
dorsed notes  for  collection  w4th  instructions 
to  protest  if  not  paid,  and  upon  learning  that 
renewals  had  been  forwarded,  returned  the 
notes  to  its  principal  without  protesting  or 
taking  steps  to  hold  indorsers.  The  renewals 
were  not  received  by  the  principal,  and  would 
have  been  unacceptable  if  received,  as  upon 
non-payment  the  principal  intended  to  bring 
suit  against  the  maker  and  indorsers.  Opin- 
ion: The  collecting  bank  is  liable  to  its  prin- 
cipal for  any  loss  sustained  because  of  viola- 
tion of  instructions.  Vol.  5,  p.  100,  Aug., 
1912. 

397.  (Tex.)  A  draft  is  marked  "no  pro- 
test," but  the  letter  of  instructions  reads 
"protest  all  items  $10  and  over  unless  marked 
X,"  and  there  is  no  X  marked  on  the  letter 
opposite  the  listed  item.  Opinion :  It  is  safer 
for  the  collecting  bank  to  be  governed  by  the 
letter  of  instructions,  as  they  are  the  instruc- 
tions from  the  immediate  principal.  Vol.  4. 
p.  556,  March,  1912. 


60 


COLLECTIOX 


405 


Forwarding  paper   direct  to   drawee 

Note:  A  bill  recommended  by  the  American 
Bankers  Association  which  provides  that  the  for- 
warding of  an  item  by  a  bank  directly  to  the 
payor  shall  be  deemed  due  diligence  and  the  fail- 
ure of  the  payor  bank  to  account  for  the  proceeds, 
shall  not  render  the  forwarding  bank  liable, 
provided  it  has  used  due  diligence  in  other 
respects,  became  law  in  191!)  in  the  following 
states:  Michigan,  Minnesota,  iiissouri,  Nevada, 
New  Mexico,  North  Carolina,  Ohio,  Oregon,  South 
Dakota.  A  similar  law  was  passed  in  Louisiana 
in  1916  and  in  Montana  in  1917. 

398.  (Ark.)  A  New  York  Itank  sent  a 
check  on  the  State  Bank  of  G.,  Arkansas,  to 
a  bank  at  H.,  Arkansas,  which  sent  it  to  a 
Little  Rock  bank.  The  latter  sent  it  to  its 
Kansas  City  correspondent  and  the  Kansas 
City  bank  sent  the  check  direct  to  the  drawee, 
receiving  St.  Louis  exchange  which  was  not 
paid  because  of  the  failure  of  the  G  bank 
drawee.  Opinion:  The  Kansas  City  corres- 
pondent was  negligent  in  mailing  the  check 
direct  to  the  drawee  and  is  responsible  if  the 
loss  is  a  result  of  this  negligence.  If,  how- 
ever, it  can  prove  the  check  would  not  have 
been  paid  if  payment  had  been  demanded  by 
an  independent  agent,  it  might  escape  liabil- 
ity, for  although  negligent,  no  loss  would  have 
resulted  therefrom.  Assuming  the  non-liabil- 
ity of  the  Kansas  City  bank,  the  question  of 
negligence  of  the  Little  liock  bank,  and  lia- 
bility if  loss  resulted  therefrom,  depends  upon 
v.'hether  the  requirement  of  presentment  with- 
in a  reasonalile  time  was  violated  by  the  cir- 
cuitous method  of  forwarding,  upon  which 
question  the  courts  differ.  Vol.  4,  p.  494, 
Feb.,  1912. 

399.  (Ga.)  A  customer  deposited  for 
collection  a  check  drawn  on  a  Texas  bank. 
The  collecting  bank  mailed  the  item  direct 
to  the  drawee  and  failed  to  hoar  from  the 
same  for  over  two  years,  during  which  time 
the  drawee's  name  disappeared  from  the  bank 
directory.  Depositor  did  not  sign  deposit 
slip  relieving  bank  from  responsibility  for 
losses  in  the  mail.  Opinion:  The  collecting 
bank  was  negligent  and  is  liable  to  its  cus- 
tomer for  the  loss  resulting.  The  sending 
of  the  check  direct  to  the  drawee  was  a  negli- 
gent act  and  the  presumption  is  the  check 
was  received  by  the  drawee  and  not  remitted 
for.  But,  assuming  loss  in  mail,  the  failure 
to  promptly  trace  was  negligence,  and  even  if 
depositor  signed  slip  this  would  not  relieve 
the  bank  from  the  consequences  of  its  own 
negligence.     Vol,  4,  p.  154,  Sept.,  1911. 

400.  (111.)  A  bank  in  Illinois  received 
for  collection   certain  checks  which   it  for- 


warded direct  to  the  drawee,  the  only  bank 
in  the  place.  The  drawee  remitted  a  draft 
in  payment,  which  was  protested  because  of 
the  drawee's  failure.  Opinion:  The  sending 
of  the  checks  direct  to  the  drawee,  unless  jus- 
tified by  custom,  is  such  negligence  as  will 
render  the  Illinois  bank  liable,  whether  it 
took  the  paper  as  owner  or  as  collecting  agent. 
As  holder  of  the  protested  draft,  it  has  no 
preferred  claim  against  the  failed  bank.  Vol. 
G,  p.  G28,  March,  1914. 

401.  (La.)  ]\railing  a  check  direct  to 
the  drawee  is  held  an  act  of  negligence  in 
Texas  and  other  states,  and  if  loss  results  the 
sending  bank  is  liable.  Vol.  2,  p.  19,  Julv, 
1909. 

402.  (Miss.)  A  bank  sent  a  check  re- 
ceived for  collection  direct  to  the  drawee. 
The  collecting  bank  received  in  payment  the 
drawee's  draft,  which  was  protested  because 
of  the  hitter's  failure.  Opinion:  Sending 
check  direct  to  drawee  is  negligent  and  send- 
ing bank  is  liable  for  resultant  loss.  Vol.  6, 
p.  686,  April,  1914. 

403.  (Mont,)  The  payee  of  a  check  de- 
posited it  in  a  bank  for  collection  and  the 
bank  mailed  it  to  a  correspondent,  which 
latter  bank  mailed  check  directly  to  tlie 
drawee.  After  charging  the  amount  to  the 
drawer,  the  drawee  failed  without  remitting 
to  the  correspondent.  Opinion:  The  drawer 
is  discharged,  the  payee  is  relieved  from  re- 
sponsil)ility  and  the  correspondent  of  the  first 
bank  is  responsible  because  of  mailing  the 
check  direct  to  the  drawee.  Vol.  4,  p,  2 IT, 
Oct.,  1!)11. 

404.  (N.  Y.)  A  bank  in  Cleveland,  to 
whom  a  check  had  been  forwarded  for  collec- 
tion, mailed  the  item  direct  to  tiie  drawee  in 
Ohio,  which  hold  it  ten  days  and  then  re- 
turned it  un})aid  and  unprotested  because  the 
drawee  had  failed.  Opinion:  The  drawer  is 
discliargod  to  the  extent  of  the  loss  caused  by 
tiie  delay  and  the  Cleveland  bank  is  respon- 
sible for  its  negligence.  Vol,  6,  p,  275,  Oct., 
1913. 

405.  (N,  M.)  A  draft  on  a  bank  at 
Clovis,  New  ^lexico,  was  deposited  in  a  bank 
at  Las  Vegas,  forwarded  to  a  bank  at  Kl 
Paso,  Texas,  from  thence  to  a  bank  at  Tu- 
cunuari,  New  Mexico,  and  I)y  the  latter  for- 
warded by  niai!  direct  to  the  drawee  I)ank  at 
Clovis.  The  Clovis  bank  paid  the  same  bv 
its  own  draft,  wiiich  was  dishonored  because 
of  the  bank's  failure.  Opinion:  The  collect- 
ing bank  mailing  the  check  direct  to  the 
drawee  and  taking  the  worthless  draft  in  pay- 


51 


400 


DIGEST  OF  LEGAL  OPINIONS 


raciit  is  resj)oiisible  for  the  loss.     Vol.  G,  p. 
35,  July,  11)13. 

406.  (Okla.)  Tlic  majority  of  courts 
hold  that  mailing  a  clicck  direct  to  the  drawee 
is  imi)roi)or,  even  though  the  drawee  is  the 
only  bank  in  the  place.  There  is  need  of 
legislation  defining  due  diligence  in  the  pre- 
sentment and  collection  of  distant  items  in 
accordance  with  legitimate  banking  customs. 
Vol.  2,  p.  73,  Aug.,  1909. 

407.  (Pa.)  A  collecting  bank  which 
sends  a  check  direct  to  the  drawee  for  pay- 
ment does  not  use  due  diligence  and  is  liable 
for  any  loss  resulting.  Vol.  6,  p.  820,  June, 
1911. 

408.  (Pa.)  A  bank  receiving  for  collec- 
tion a  check  forwarded  the  same  direct  to  the 
drawee  and  not  to  its  correspondent,  for  the 
purpose  of  facilitating  collection.  The 
drawee  failed  before  its  draft  in  payment 
could  be  collected.  Opinion:  Sending  check 
to  drawee  is  negligent  and  the  collecting  bank 
is  liable  if  loss  results  therefrom.  Vol.  6, 
p.  208,  Sept.,  1913. 

409.  (Tex.)  A  customer  deposited  for 
collection  a  check  which  was  forwarded  by 
mail  by  a  correspondent  bank  in  Dallas  to  the 
drawee  bank,  being  the  only  bank  in  the  place. 
The  drawee  sent  the  Dallas  bank  its  draft,  but 
in  the  meantime  failed.  Opinion:  Assuming 
a  custom  can  be  proved  of  sending  a  check  to 
the  drawee  where  the  only  bank  in  the  place, 
the  Texas  courts  will  probably  hold  the  Dallas 
bank  free  from  negligence,  and  the  customer 
would  have  to  look  solely  to  the  assets  of  the 
drawee.     Vol.  6,  p.  34,  July,  1913. 

Insolvency  of  collecting  bank 

410.  (Ala.)  A  check  was  forwarded  ''for 
collection  and  returns"  and  the  collecting 
bank  failed  after  making  the  collection. 
Opinion:  The  proceeds  in  the  hands  of  the 
failed  bank  are  recoverable  as  a  trust  fund 
provided  their  identity  can  be  traced.  ^Yhe^e 
a  failed  bank  in  Alabama  is  not  a  trustee  but 
a  debtor  for  collection  proceeds,  a  creditor, 
unless  he  is  a  depositor,  is  subordinated  to 
claims  upon  non-interest  bearing  deposits. 
Vol.  8,  p.  40,  July,  1915. 

411.  (Del.)  A  bank  in  Delaware  re- 
ceived from  its  customer  ''subject  to  final 
payment"  a  check  drawn  on  a  trust  company 
in  North  Carolina,  The  check  was  for- 
warded to  a  Baltimore  correspondent,  thence 
to  a  bank  in  the  same  place  as  the  drawee, 
which  collected  from  the  drawee  and  failed 
two  d'Axs  later  without  remitting.     Opinion: 


The  amount  is  chargeable  back  by  the  Bal- 
timore bank  to  tlie  Delaware  bank,  and  by  the 
latter  to  its  customer,  who,  however,  has  a 
claim  upon  the  receiver  of  tlie  failed  bank  for 
the  full  proceeds  as  a  trust  fund.  Under  the 
law  of  Maryland  a  collecting  bank  is  not  liable 
for  its  correspondent's  defaults,  and  this 
would  relieve  tlic  Baltimore  Ijank.  In  Del- 
aware, the  point  is  not  decided,  but  the  credit 
of  the  check  "subject  to  final  payment"  would 
relieve  the  Delaware  bank.  Vol.  9,  p.  49, 
July,  1916. 

412.  (Fla.)  A  check  drawn  on  a  Florida 
bank  is  cashed  in  Kansas  City,  is  forwarded 
through  the  mail  and  the  proceeds  remitted 
by  the  drawee  to  the  last  collecting  bank, 
w^hich  fails  before  itself  remitting.  The 
Kansas  City  bank  seeks  to  recover  from  the 
drawer.  Opinion:  When  the  proceeds  w^ere 
remitted  by  the  drawee  to  the  collecting  bank, 
this  constituted  payment  which  discharged 
the  drawer.  The  owner  bank  in  Kansas  City 
which  first  cashed  the  check,  would,  therefore, 
have  no  recourse  upon  the  drawer  but  must 
look  to  the  assets  of  the  failed  bank  for  reim- 
bursement.    Vol.  9,  p.  828,  April,  1917. 

413.  (Kan.)  A  customer  shipped  a  car 
of  corn  and  deposits  with  his  bank  a  draft 
drawn  on  the  consignee  with  bill  of  lading  at- 
tached, with  instructions  that  the  same  should 
be  sent  to  the  First  National  Bank  of  X, 
Kansas,  for  collection.  The  draft  was  col- 
lected and  remitted  for  by  the  collecting 
bank's  draft,  which  was  dishonored  because 
of  insolvency.  Opinion:  The  customer's 
bank  because  of  the  special  instructions  took 
the  draft  not  as  owner  but  as  agent  for  collec- 
tion and  can  charge  the  amount  back  to  the 
customer.  Although  the  customer  received 
credit  for  the  draft,  it  would  be  regarded 
merely  as  provisional,  which  could  be  re- 
voked upon  non-payment.  The  customer 
would  be  entitled  to  payment  of  the  proceeds 
in  full  by  the  receiver  of  the  collecting  bank. 
Vol.  1,  p.  366,  April,  1909. 

414.  (Mich.)  An  item  drawn  on  B 
bank  sent  for  collection  to  C  National  Bank 
in  Michigan  was  collected  and  remitted  for 
by  that  bank's  draft,  which  was  dishonored 
because  of  the  bank's  failure.  Opinion: 
Under  the  law  of  Michigan  (the  authorities 
elsewhere  being  in  conflict)  bank  owning 
item  collected  is  entitled  to  pa^-ment  of  pro- 
ceeds in  full  bv  receiver.  Vol.  2,  p.  417, 
April,  1910. 

415.  (Mont.)  Where  A  deposits  money 
in  H  bank  to  pay  a  draft  which  is  forwarded 


52 


COLLECTION 


[424 


by  B  to  H  bank  for  collection  and  II  bank 
applies  money  and  sends  its  own  draft  in  re- 
mittance, which  is  dishonored  because  of  its 
failure,  the  loss  falls  on  B,  not  on  A.  Vol. 
5,  p.  379,  Dec,  1912. 

Preferred  claim  against  insolvent  collect- 
ing bank 
See  373,  376 

416.  (Wash.)  A  bank  took  a  check  for 
collection  and  credit,  but  credit  was  not  given 
at  the  time  of  deposit  and  the  returns  were 
not  received  until  after  the  bank  had  failed. 
Opinion:  The  depositor  is  entitled  to  the  en- 
tire proceeds.  The  check  was  deposited  at  a 
time  when  the  bank  was  insolvent  and  re- 
mains the  property  of  the  depositor.  ^""01.  7, 
p.  387,  Dec,  191-1. 

417.  (Wis.)  A  note  was  sent  to  the 
First  National  Bank  of  X  for  collection,  and 
the  amount  was  paid  to  said  bank  at  matu- 
rity, by  a  check  against  the  account  of  one  ^M 
in  said  bank.  Two  days  later  )the  bank 
failed.  The  receiver  forwarded  to  the  owner 
the  draft  of  the  First  National  Bank  of  X 
which  had  been  drawoi  for  the  purpose  of  re- 
mitting for  the  collection.  Opinion:  The 
owner  of  the  draft  has  no  preferred  claim 
against  the  insolvent  bank,  there  being  no 
increase  of  the  bank's  assets  by  the  trans- 
action.    Vol.  2,  p.  484,  May,  1910. 

Collection  of  draft  covering  interstate 
shipment  of  liquor 

418.  (Mo.)  A  bank  collecting  a  draft 
with  a  warehouse  receipt  for  intoxicating  li- 
quor attached,  coming  from  another  state, 
would  not  violate  Section  239  U.  S.  Criminal 
Code,  under  which,  according  to  a  Federal  de- 
cision in  N'orth  Dakota,  it  is  unlawful  for  a 
bank  to  collect  a  bill  of  lading  draft  covering 
an  interstate  shipment  of  intoxicating  liquor. 
A^ol.  5,  p.  169,  Sept.,  1912. 

419.  (Pa.)  Section  239  of  the  United 
States  Criminal  Code  makes  it  criminal  for 
a  bank  to  collect  a  draft  with  a  bill  of  lading 
attached  covering  a  shipment  of  intoxicating 
liquor  from  one  state  to  another.  Vol.  4,  p. 
C14,  April,  1912. 

Items  received   oy  insolvent  banker 

420.  (Va.)  Where  a  private  banking 
firm  receives  paper  for  collection,  knowing  at 
the  time  that  it  is  insolvent  and  will  not  be 
able  to  make  a  return.  Opinion  expressed 
that  this  is  such  fraud  as  will  entitle  the  de- 


positor of  the  items  to  reclaim  the  same  or 
their  full  proceeds  from  the  receiver  or  as- 
signee.    Vol.  3,  p.  522,  March,  1911. 

Lien  on  paper  forwarded 

421.  (W.  Va.)  The  bank  of  A  received 
for  collection  from  the  bank  of  C,  which 
thereafter  failed,  a  note  drawn  by  B  and  in- 
dorsed in  blank  by  the  payee,  "Pay  to  the 
order  of  any  bank,  banker  or  trust  company." 
Opinion:  This  form  of  indorsement  indi- 
cated that  the  bank  of  C  was  not  tiie  owner 
but  the  collecting  agent  for  the  note.  A  bank 
therefore  acquired  no  right  of  lien  upon  tlie 
paper  for  an  indebtedness  to  it  of  the  bank  of 
C.     A^ol.  6,  p.  372,  Nov.,  1913. 

422.  (W.  Va.)  The  bank  of  A  received 
from  the  bank  of  C  for  collection  a  draft 
drawn  by  B,  both  banks  having  mutual  deal- 
ings. After  the  C  bank  had  failed  the  draft 
was  paid  and  the  A  bank,  having  no  knowl- 
edge from  the  form  of  the  draft  that  the  C 
bank  was  not  the  owner,  credited  the  latter 
bank  with  the  amount.  Opinion:  Unless  the 
A  bank  knew  that  the  C  bank  was  the  col- 
lecting agent  of  the  drawer,  it  had  a  lien  upon 
the  paper  or  its  proceeds  for  a  balance  of 
account  due  from  the  failed  bank.  Vol.  6, 
p.  91,  Aug.,  1913. 

Liability  for  not   turning   over   proceeds 

423.  (Ind.)  Where  J  gave  D  his  check 
to  take  up  a  note  upon  which  J  was  surety 
and  after  the  check  had  been  paid,  the  collect- 
ing bank  returned  tlie  money  to  the  drawee 
because  the  latter  claimed  payment  had  been 
made  by  mistake,  and  that  J  had  counter- 
manded it.  Opinion:  That  such  collecting 
bank  is  liable  to  D  for  tlie  money  so  collected, 
and  that  this  liability  would  exist,  even 
tliough  the  note  for  which  the  check  was 
given  was  based  on  an  illciral  consideration. 
Vol.  1,  p.  60,  Aug,  1908. 

Recovery  of  proceeds  paid  in  advance  of 
collection 

424.  (N.  Y.)  A  New  York  bank  re- 
ceived for  collection  a  chock  drawn  on  Bank 
A  of  N'orth  Carolina  and  forwarded  it  to  its 
Kaleigh  correspondent.  The  Ealeigh  bank 
forwarded  the  item  to  its  correspondent, 
Bank  B,  which  collected  from  the  drawee. 
The  Raleigh  bank  took  its  correspondent's 
draft  as  cash  and  in  advance  of  collection  re- 
mitted to  the  New  York  bank.  Bank  B 
failed  and  its  draft  was  dishonored.  Opin- 
ion: In  North  Carolina  a  collecting  bank  is 
not  liable  for  its  correspondent's  default,  if 


53 


425 


DICIEST  OF  LEGAL  OPINIONS 


duly  selected,  and  in  the  absence  of  ne^'li- 
<,^'nce  on  the  part  of  the  IJaleigli  bank  and 
iniless  ])aynK'nt  of  the  i)r()cee(ls  led  the  New 
York  bank  to  do  somethint;  whicli  if  repay- 
ment was  made  would  result  to  its  injury,  the 
])aymcnt  by  the  Haleigh  bank  is  not  iiiuil  but 
can  be  recovered  as  money  paid  by  mistake 
without  consideration.  Vol.  4,  p.  91,  Aug., 
IDIL 

Charging  note  against  subsequent  deposit 

425.  (Ohio.)  A  bank  received  for  col- 
lection a  note  payable  at  the  same  bank  and 
the  maker's  account  is  insuflficient  at  matu- 
rity. The  maker  made  a  subsequent  deposit, 
sufficient  to  meet  the  past  due  instrument. 
Opinion:  The  bank  should  not  charge  the 
instrument  against  the  subsequent  deposit 
without  express  instructions  from  the  maker. 
Vol.  5,  p.  309,  Nov.,  1913.  See  Notes  pay- 
able at  bank,  1007  et  seq. 

Duty  to  trace  unacknowledged  items 

426.  (Ark.)  A  collecting  bank  which  re- 
ceives and  forwards  an  item  to  a  correspond- 
ent which  is  not  acknowledged  or  remitted 
for  in  due  course,  must  promptly  trace  such 
item  and  notify  its  principal,  and  a  delay  of 
47  days  is  unreasonable  and  will  make  the  col- 
lecting bank  responsible  to  its  principal  for 
the  loss.     Vol.  11,  p.  557,  April,  1919. 

427.  (Tex.)  On  July  31,  1918,  a  cus- 
tomer deposited  a  check  drawn  on  a  bank  in 
L.,  Texas.  The  bank  of  deposit  sent  the 
check  as  a  cash  item  to  its  correspondent  at 
A.,  Texas,  which  at  once  sent  it  to  the  drawee 
bank.  On  November  22,  1918,  four  months 
later,  the  correspondent  bank  at  A.  reported 
that  the  check  had  been  lost  between  A.  and 
L.     The  correspondent  bank  contends  that  it 


took  the  check  subject  to  final  payment  and  is 
not  responsible.  Opinion:  It  is  tiie  duty  of 
a  collecting  bank  to  ascertain  within  a  rea- 
sonable time  whether  paper  entrusted  to  it 
for  collection  and  transmitted  by  it  to  a  cor- 
respondent has  been  received  by  such  corres- 
pondent; and  if  not,  to  advise  its  customer  of 
such  fact  and  it  is  liable  for  loss  resulting 
from  its  failure  to  do  so.  Just  what  consti- 
tutes a  reasonable  time  depends  upon  the 
facts  of  each  individual  case.  In  a  Kentucky 
case  a  delay  of  eight  davs  was  held  to  amount 
to  negligence.     Vol.  if,  p.  GIO,  May,  1919. 

Payment  against  uncollected  funds 

Ivflatioii  of  iMiik  upon  deposit  of  check.     See  299 

428.  (Conn.)  The  majority  of  courts 
hold  (some  decisions  contra)  that  upon 
credit  to  a  depositor  of  a  check  indorsed  in 
blank,  title  passes  to  the  bank  and  the  de- 
positor has  an  immediate  right  to  check 
against  the  credit  unless  there  is  a  contrary 
understanding  or  agreement  based  on  (1) 
general  usage  not  to  pay  against  uncollected 
funds,  (2)  notice  printed  in  pass-book  or  on 
deposit  slip,  (3)  special  agreement  with  par- 
ticular depositor,  (4)  crediting  deposit  as 
paper  and  not  as  cash.  Vol.  2,  p.  333,  Feb., 
1910. 

429.  (111.)  A  bank  credited  its  depos- 
itor with  a  check  on  an  out-of  town  point, 
still  uncollected.  The  depositor  presented 
his  check  against  said  item  for  certification. 
Opinion:  The  bank  is  not  obliged  to  certify 
the  check.  Lender  the  law  of  Illinois,  in  the 
absence  of  a  contrary  agreement  or  usage,  a 
bank  becomes  a  debtor  for  deposited  items 
immediately  upon  credit,  but  the  custom  is 
quite  universal  not  to  pay  checks  against  such 
credit  prior  to  the  collection  of  the  items  it 
represents.     Vol.  7,  p.  1001,  June,  1915. 


CORPORATIONS 


Power  to  indorse  for  accommodation 

430.  (N.  J.)  As  a  general  proposition 
no  corporation  in  any  state,  in  the  absence  of 
statutory  authority,  has  power  to  make  or  in- 
dorse paper  for  accommodation.  Such  paper 
is  valid  and  enforceable  only  in  the  hands  of 
a  holder  taking  the  same  before  maturity,  in 
good  faith  and  without  notice.  Vol.  8,  p. 
250,  Sept.,  1915. 

Failure  to  adopt  by-laws 

431.  (Miss.)  A  corporation  transacts 
business  without  adopting  any  by-laws.  The 
corporation   becoming   involved   in    damage 


suits  and  approaching  insolvency  questions 
the  validity  of  its  corporate  acts  by  reason  of 
the  omission.  Opinion:  When  the  govern- 
ing statute  in  express  terms  confers  upon  a 
corporation  the  power  to  adopt  by-laws,  the 
failure  to  exercise  the  power  will  be  ascribed 
to  mere  non-action,  which  will  not  render 
void  any  acts  of  the  corporation  which  would 
otherwise  be  valid.  Vol.  5,  p.  6<o8,  April, 
1913. 

Nature  of  unpaid  dividends 

432.     (N.  J.)     "Where  a  dividend  has  been 
declared,    but   remains   unpaid,    conflicting 


54 


COEPORATIOXS 


439 


authorities  reviewed  showing  view  more  gen- 
erally prevailing  to  be  (a)  if  dividend  special- 
ly set  apart  or  segregated  it  is  a  trust  fund, 
]iot  liable  for  debts  of  corporation,  and  in 
event  of  insolvency  unpaid  stockholder  is 
])roi'erred  to  common  creditor,  but  (b)  if  not 
specially  set  apart  it  remains  property  of  cor- 
poration, liable  for  its  debts  and  unpaid 
stockholders  not  preferred  in  case  of  insolv- 
ency. Some  courts,  however,  hold  that  mere 
declaration  constitutes  a  trust  fund  without 
special  sesreaation.  Vol.  6,  p.  373,  Xov., 
1913.     See  212,  221,  228,  237,  238. 

Right  of  purchaser  of  stock  to  dividend 

433.  (N.  Y.)  A  man  purchased  stock 
through  a  brokerage  firm.  After  the  stock 
had  been  sold,  and  before  it  had  been  trans- 
ferred on  the  company's  books,  a  dividend 
was  declared  and  the  check  mailed  to  the 
previous  owner.  The  brokerage  office  claims 
the  check  should  be  given  to  the  new  owner. 
Opinion:  Where  a  dividend  is  declared  after 
stock  is  sold,  it  belongs  to  the  purchaser, 
although  the  transfer  has  not  been  recorded 
on  the  books  and  the  company  has  paid  the 
dividend  to  the  person  appearing  on  its  books 
as  the  ovnaev.     Vol.  10,  p.  660,  March,  1918. 

Signature  to  corporation  note 

434.  (Me.)  An  order,  note  or  agree- 
ment was  signed  "John  Smith  Company, 
John  Smith,  Treasurer,"  without  the  prefix 
"by"  before  "John  Smith."  Opinion:  Such 
form  of  signature  is  generally  held  to  be  the 
signature  of  the  corporation  alone  (such  is 
the  case  in  Maine)  although  in  one  or  two 
states  it  has  been  held  to  import  an  obligation 
both  of  the  company  and  John  Smith  indi- 
vidually.    Vol.  5,  p.  755,  May,  1913. 

435.  (N.  Y.)  A  corporation  note  was 
executed  as  follows : 

$1,000  Buffalo,  N.  J.,  June  4,  1911. 

On  demand  after  date,  mc  promise  to  pay 
to  the  order  of  oiirselves  at  the  First  National 
Bank,  Buffalo,  X.  Y.,  one  Thousand  Dollars. 
Value  received  with  interest.  Home  Hard- 
ware Co.  IT.  I.  Jones,  Trcas.  Indorsed 
Home  Hardware  Co.,  H,  I.  Jones,  Treas. 
The  question  was  raised  as  to  the  personal 
liability  of  H.  I.  Jones,  thereon.  Opinion: 
A  note  reading  "We  promise  to  pay"  signeil 
"Home  Hardware  Co.,  H.  I.  Jones,  Treas." 
is  generally  held  to  be  the  note  of  the 
corporation  alone  equally  as  if  the  word 
"by"  were  prefixed  to  the  name  of  the  treas- 
urer and  the  latter  is  not  personally  liable. 


The  point  has  not  yet  been  decided  in  Xew 
York.     Vol.  4,  p.  306,  Xov.,  1911. 

436.  (N.  Y.)  Where  the  name  of  the 
corporation  is  not  designated  as  the  sole 
promisor  in  the  body  of  the  note  and  it  is 
signed  merely  "John  Jones,"  Treasurer,"  the 
weight  of  authority  is  that  the  word  "Trea- 
surer" is  merely  descriptive  of  the  person  and 
not  of  the  character  of  the  liability  and  that 
Jones  will  be  personally  liable.  Had  John 
Jones  in  the  above  case  signed  "As  Treasur- 
er," without  disclosing  his  principal  he  would 
not  have  been  shielded  from  personal  liabil- 
ity.    Vol.  3,  p.  466,  Feb.,  1911. 

437.  (N.  Y.)  Where  a  corporation  note 
simply  reads  "I"  or  "We"  promise  to  pay, 
\\ithout  reciting  in  the  body  of  the  promise 
that  "The  Smith  Manufacturing  Co."  pro- 
mises to  pay,  the  form  of  the  signature  whicli 
should  be  used  by  an  officer  authorized  to 
sign,  in  order  to  free  himself  from  personal 
liability,  should  be  either  "The  Smith  Man- 
ufacturing Co.  by  John  Jones,  Treasurer," 
or  "For  the  Smith  Manufacturing  Co.,  John 
Jones,  Treasurer."  Vol.  3,  p.  466,  Feb., 
1911. 

438.  (N.  C.)  According  to  the  weight 
of  authority  a  note  signed  "Doe  ilanufactur- 
ing  Company,  John  Doe,  President,  Jim  Doe, 
Treasurer,"  is  held  to  be  the  obligation  of  the 
corporation  alone,  although  the  word  "by"  or 
"per"  is  not  prefixed  to  the  signature  of  the 
officers,  but  in  a  few  states  where  the  form  of 
the  note  reads  "we  promise  to  pay"  the  sig- 
nature would  be  prima  facie  evidence  binding 
both  corporation  and  officers  individual! v. 
Vol.  7,  p.  386,  Dec,  1914. 

Voting  control  by  fraction  of  share 

439.  (Wash.)  A  corporation  organized 
with  a  capital  stock  of  1,000  shares  at  $100  a 
sliare  has  three  shareholders.  A,  B  and  C. 
A  owns  two  certificates  for  499.80  shares  and 
40  sliares,  totaling  500.20  shares,  as  against 
li  and  C,  the  owners  of  two  certificates  of 
2l!).90  each,  totaling  499.80  shares.  The 
question  is  raised  as  to  whether  A  could  con- 
trol the  cor)>oration  l)y  a  fraction  of  a  share. 
Opinion:  The  control  of  the  corporation 
would  be  held  to  rest  in  A  because  he  is  the 
majority  stockholder.  A  single  share  is  the 
voting  unit  and  a  fraction  of  a  share  cannot 
be  voted  in  the  absence  of  an  express  provi- 
sion therefor  in  a  statute  or  by-laws  of  the 
corporation.  But  if  A  was  unable  to  exercise 
control  by  inability  to  vote  the  fraction,  a 
court  of  equitv  would  doubtless  enforce  his 
rights.     Vol.  7,  p.  995,  June,  1915. 


55 


440 


DRJEST  OF  LEGAL  OPIIS'IONS 


Voting  power  of  stockholder 

See  li2."i,  242,  2V.i 

440.  (Wash.)  At  common  law  each 
stockliolder  in  a  corporation  has  one  vote,  ir- 
respective of  the  number  of  shares  lield  l)y 


him.  This  has  been  changed  by  statute  in 
most  states,  which  hohl  tiiat  tlie  stockholder 
has  one  vote  for  each  share  of  stock  owned  by 
him,  and  in  some  states  cumulative  voting  is 
])rovided  for.     Vol.  7,  p.  995,  June,  1915. 


DEATH  AND  DECEDENT'S  ESTATE 


Payment  of  deposit  to  administrator 

441.  (Kan.)  A  bank  refused  to  pay  a 
chock  drawn  against  the  account  of  its  de- 
ceased depositor  until  further  evidence  of  the 
drawer's  authority.  The  drawer,  wlio  was 
the  administrator,  claimed  that  the  indorse- 
ment of  the  bank  through  whom  the  check 
was  presented  was  sufficient  assurance  that 
he  had  been  legally  appointed  administrator. 
Opinion:  A  bank  has  the  right  to  demand  the 
production  of  letters  of  administration  before 
paying  the  deposit  of  a  decedent  upon  check 
of  one  claiming  to  be  administrator.  Vol. 
10,  p.  852,  June,  1918. 

Right  to  credit  decedent's  account 

442.  (N.  J.)  Several  certified  checks 
payable  to  a  decedent  were  offered  for  deposit 
to  the  credit  of  the  decedent's  account  by  one 
of  the  executors,  prior  to  the  qualification  of 
the  executors  under  the  will  of  the  decedent. 
Opinion:  A  bank  whose  customer  has  de- 
ceased may  properly,  in  the  interests  of  his 
estate  and  before  an  executor  or  administra- 
tor has  qualified,  receive  money  or  checks 
offered  by  a  debtor  of  the  decedent  and  place 
them  to  the  credit  of  his  account,  but  until 
the  bank  has  been  duly  authorized  to  receive 
such  money  or  receive  and  collect  such  checks, 
payment  of  the  latter  would  not  be  a  dis- 
charge of  liability  to  the  estate  and  the  payors 
would,  in  the  event  of  the  failure  of  the  bank, 
remain  liable  to  the  estate.  Vol.  5,  p.  245, 
Oct.,  1912. 

443.  (N.  Y.)  A  owes  a  customer  of  the 
bank,  who  is  deceased,  and  wishes  to  deposit 
the  amount  in  the  hank  for  him.  The  ques- 
tion is  whether  the  amount  should  be  credited 
to  the  account  of  the  decedent  or  to  the  ac- 
count of  his  estate.  Opinion:  Strictly  the 
bank  has  no  right  to  receive  the  deposit  to  the 
credit  of  the  estate  unless  authorized  by  the 
legal  representative.  But  it  might  be  con- 
venient for  the  bank  to  credit  it  to  the  estate 
to  be  held  for  and  paid  to  the  representative. 
Vol.  5,  p.  176,  Sept.,  1912. 


Deed  for  annuity 

444.  (Okla.)  A,  the  owner  of  a  tract  of 
land,  proposes  to  deed  it  to  B  upon  the  condi- 
tion that  B  pay  A  an  annuity  of  $1,000  during 
A's  lifetime,  and  thereafter  upon  A's  death 
to  continue  the  annuity  to  C  during  C's  life- 
time. A  wishes  to  construct  the  proper  form 
of  deed.  Opinion:  The  deed  could  be  drawn 
with  a  condition  subsequent  incorporated 
therein  by  the  use  of  the  words  "upon  condi- 
tion" with  a  clause  providing  for  the  reentry 
of  A  or  his  heirs  upon  the  land  on  the  breach 
of  such  condition.  Vol.  5,  p.  104,  Aug., 
1912. 

Delivery  of  deed  after  death 

445.  (Mo.)  A  widow  with  two  children 
owns  land,  and  does  not  want  to  make  a  will. 
She  proposes  to  make  deeds  to  each  child, 
which  she  can  hold  until  her  death  and  then 
have  them  delivered  to  the  two  children. 
Opijiion:  Deeds  executed  by  the  grantor  to 
her  two  children  and  held  by  her  with  inten- 
tion that  tliey  shall  be  delivered  after  death 
would  be  ineffectual,  if  not  delivered  during 
her  lifetime,  to  pass  title  to  the  grantees. 
A"ol.  10,  p.  380,  Nov.,  1917.    See  499. 

Disposal  of  funds  of  intestate  by  bank 

446.  (N.  J.)  A  New  Jersey  bank  asks 
how  to  dispose  of  funds  which  it  has  on  de- 
posit in  the  name  of  a  depositor  who  died 
intestate,  his  only  survivors  being  a  son  and 
a  former  wife  who  was  divorced  and  re- 
married in  his  lifetime.  Opinion:  The  mar- 
ried woman  is  not  the  widow  of  the  deceased, 
and  the  only  surviving  son  is  entitled  to  the 
entire  deposit  under  the  provisions  of  the 
New  Jersey  statutes.  Vol.  10,  p.  598,  Feb., 
1918. 

Authority  to  renew  notes  of  testator 

447.  (Pa.)  In  the  absence  of  statute  or 
of  express  authority  in  the  will,  an  executor 
would  have  no  power  to  bind  the  estate  of  the 
testator  by  making,  as  executor,  a  new  note 
in  renewal  of  one  made  by  the  testator  or  by 
renewing  indorsements  on  notes  originally  in- 


56 


DEATH  AXD  DECEDEXT'S  ESTATE 


455 


dorsed  by  the  testator,  and  such  acts  bind 
only  the  executor  personally.  No  such  stat- 
ute exists  in  Pennsylvania.  Vol.  7,  p.  104, 
Aug.,  1914. 

Heir's  note  for  decedent's  debt 

448.  (111.)  A  widow  and  daughter  of 
the  decedent  gave  their  notes  to  a  bank  in 
part  payment  of  a  note  of  the  decedent  which 
the  bank  neglected  to  prove  against  the  de- 
cedent's estate  within  the  time  required  by 
law.  Opinion:  The  authorities  are  in  con- 
flict whether  such  notes  of  widow  and  daugh- 
ter, receiving  assets  of  the  estate,  given  in  part 
pa3'ment  of  a  note  of  the  decedent,  outlawed 
by  non-claim,  are  supported  by  a  sufficient 
consideration  and  enforceable.  In  Illinois,  the 
question  is  yet  to  be  litigated.  Vol.  5,  p. 
375,  Dec,  1912. 

Payment  of   check  after  drav^er's   death 

See   004 

449.  (Mass.)  The  death  of  a  drawer 
revokes  the  authority  of  a  bank  to  pay  his 
outstanding  checks,  and  payment  by  the  bank 
after  knowledge  of  the  death  of  the  drawer  is 
unauthorized,  but  the  bank  is  protected  where 
it  pays  the  clicck  in  ignorance  of  the  death. 
A  statute  in  ^Massachusetts,  however,  author- 
izes a  bank  to  pay  a  check  of  a  depositor,  not- 
withstanding his  death,  if  presented  within 
ten  davs  after  date  and  tliis  applies  to  nation- 
al banks.     Vol.  7,  p.  307,  Nov.,  1914. 

450.  (N.  C.)  Except  where  a  contrary 
rule  is  provided  by  statute  and  in  the  few 
states  where  check  is  an  assignment,  death  of 
drawer  of  check  revokes  bank's  authority  to 
pay,  although  if  bank  pays  in  ignorance  of 
death  it  is  protected.  Vol.  5,  p.  523,  Feb., 
1913. 

Note:  Rule  that  clicck  is  assignment  has  been 
abrogated  by  Negotiable  Instrument  Law,  passed 
in  all  states  except  Georgia. 

451.  (Wash.)  While  the  common  law 
rule  estal)lisbed  l)y  tlie  weight  of  authority  in 
this  country  is  that  death  of  tlio  principal 
revokes  an  agent's  authority  and  payment 
thereafter  to  the  agent,  even  though  in  ignor- 
ance of  such  death,  does  not  discharge  the 
obligation,  the  courts  whicli  administer  such 
rule  admit  its  harshness,  and  some  courts 
have  made  an  exception  wliere  a  bona  fide 
payment  is  made  in  ignorance  of  the  princi- 
pal's death.  The  New  York  Court  of  Ap- 
peals in  a  recent  decision  has  declared  in 
view  of  long-established  custom  that  payment 
of  a  check  by  a  banker  in  ignorance  of  the 


drawer's  death  constitutes  an  exception  to 
the  common  law  rule  and  is  valid,  and  the 
reasoning  of  the  court  would  lead  to  a  like 
conclusion  where  payment  of  the  check  of  an 
attorney  in  fact  is  made  in  ignorance  of  the 
principal's  death.  It  is  reasonable  to  assume 
that  courts  in  future  cases  will  so  hold.  Vol. 
11,  p  1G4,  Sept.,  1918.     See  4G2. 

452.  (Ga.)  A  Imsband,  critically  ill, 
drew  and  delivered  to  his  wife  a  check  for  "all 
of  my  deposit."  The  husband  died  and  the 
wife  is  likely  to  present  the  check.  Opinion: 
The  bank  would  be  safe  in  paying  the  wife 
after  the  husband's  death,  on  the  ground  that 
the  check  constituted  an  assignment  of  the 
entire  deposit,  and  its  delivery  completed  a 
gift  causa  mortis,  by  virtue  of  which  the  de- 
posit belonged  to  the  wife  and  not  to  the 
husband's  estate.     Vol.  5,  p.  661,  April,  1913. 

453.  (Idaho.)  A  check  draw^l  on  a 
I)ank  in  Oregon  was  given  in  pajinent  for 
goods  sold  and  delivered.  The  check  in  due 
course  reached  the  drawee  bank  which  re- 
fused payment  on  the  ground  that  the  drawer 
was  dead.  Opinion:  The  death  of  the  drawer 
operated  as  a  revocation  of  the  authority  of 
the  bank  to  pay  liis  check.  Vol.  6,  p.  434, 
Dec,  1913. 

454.  (Kan.)  The  death  of  the  drawer 
revokes  the  bank's  authority  to  pay  his  check 
except  where  the  check  is  an  assignment,  or 
the  statute  expressly  authorizes  pa\iuent  dur- 
ing a  limited  time  after  the  drawer's  deatli; 
but  where  the  bank  pays  in  ignorance  of 
the  death  it  is  protected.  In  Kansas  a  check 
is  not  an  assignmeiit — the  Negotiable  Instru- 
ments Law  expressly  provides  the  contrary. 
Vol.  5,  p.  107,  Aug.,  1912. 

455.  (111.)  Several  checks  of  a  decedent 
were  presented  for  payment  at  the  bank, 
wliere  the  depositor  had  sufficient  funds.  The 
bank,  having  received  notice  of  the  depositor's 
death,  refused  payment  and  was  sued  by  one 
of  the  holders.  Opinion:  Under  the  Nego- 
tiable Instruments  Law  of  Illinois  the  bank 
was  not  liable  to  the  holder  on  the  narrow 
ground  that  death  of  drawer  revoked  the 
bank's  authority  to  pay  and  on  the  broader 
ground  that  the  bank  owed  no  duty  to  the 
holder.  Death  of  the  drawer  revokes  the 
authority  of  a  bank  to  pay  his  checks  wherever 
the  rule  prevails  that  a  check  is  not  an  assign- 
ment, except  in  a  few  states  where  special 
statutes  authorize  payment  within  a  limited 
period  after  death.  Vol.  5,  p.  G59,  April, 
1913. 


57 


456] 


DIGEST  OF  J.ECJAL  Ol'lMOXS 


456.  (Mass.)  In  Massaclmsctls  Ji  bank 
is  iiiilliorizcd  lo  pay  a  clicck  after  the  draw- 
er's (loalh  within  ten  days  (and  a  savings 
bank  within  thirty  days)  after  its  date.  A 
check  is  dated  June  3,  and  ten  days  would 
bring  it  to  the  13th,  but  that  day  being  Sun- 
day, wouhl  the  14th,  Monday,  be  considered 
the  10th  day?  Opinion:  The  authority  does 
not  extend  the  time  limited,  although  the  last 
dav  falls  on  Sunday.  Vol.  9,  p.  !)04,  May, 
11)1 7. 

457.  (Minn.)  In  Minnesota,  by  a  recent 
decision  of  the  Supreme  Court,  a  check  op- 
erates as  an  assignment  and  the  death  of  the 
drawer  does  not  revoke  the  authority  of  the 
bank  to  pay.     Vol.  4,  p.  610,  April,  1912. 

Note:  This  rule  is  overturned  by  tlie  Negotiable 
Instruments  Act  passed  in  Minnesota  in  April, 
1913. 

458.  (Pa.)  In  the  absence  of  a  statute, 
the  death  of  the  drawer  revokes  the  bank's 
authority  to  pay  the  draw^er's  checks,  and 
payment  after  knowledge  of  the  death  is  un- 
authorized.    Vol.  3,  p.  276,  Nov.,  1910. 

459.  (S.  C.)  In  South  Carolina,  where 
the  rule  prevails  that  a  check  is  an  assign- 
ment, a  check  is  payable  by  a  bank  to  a  bona 
tide  holder  notwithstanding  the  death  of  the 
drawer  before  its  presentation  for  payment. 
Vol.  6,  p.  434,  Dec,  1913. 

Note:  Tliis  rule  is  overturned  by  the  Negotiable 
Instruments  Act  jiassed  in  South  Carolina  in 
March,  1914. 

460.  (S.  Dak.)  Under  the  Negotiable 
Instruments  Act  a  check  is  not  an  assignment 
and  death  of  the  drawer  revokes  the  author- 
ity of  the  bank  to  pay  his  outstanding  checks, 
in  the  absence  of  a  special  statute  authorizing 
the  bank  to  pav  within  a  limited  period  after 
death.     Vol.  6^,  p.  434,  Dec,  1913. 

461.  (W.  Va.)  A  gave  B  his  check  in 
the  afternoon  and  died  that  evening.  B  pre- 
sented the  check  the  next  morning.  Opin- 
ion: The  death  of  the  drawer  revokes  the  au- 
thority of  the  bank  to  pay  his  check  and  pay- 
ment with  notice  or  knowledge  of  death  is 
at  the  bank's  peril  in  the  absence  ot  a  statute 
providing  for  payment  after  death  of  the 
drawer.  Such  a  statute  exists  in  West  A'^ir- 
ginia  but  is  applicable  only  to  savings  banks. 
Ohio  has  no  statute  on  the  subject.  Vol.  8, 
p.  420,  Nov.,  1915. 

Power  of  attorney  affected  by  death 

462.  (Tenn.)  A  depositor  gave  instruc- 
tions to  her  bank  that  checks  against  her  ac- 


count should  be  signed  cither  by  herself  or 
by  lier  nephew  signing  her  name  by  him. 
Jler  nephew  presented  checks  signed  in  the 
usual  manner,  but  before  payment  the  bank 
learned  of  its  customer's  death.  The  bank 
refused  payment  but  questions  whether  if  the 
checks  had  been  paid  in  ignorance  of  the  de- 
l)ositor's  death  it  would  have  been  protected. 
Opinion:  The  general  rule  at  common  law 
is  that  a  power  of  attorney,  unless  coupled 
with  an  interest,  is  revoked  by  tiie  principal's 
death.  The  Appellate  Division  of  the  New 
York  Supreme  Court  has  held  that  payment 
by  a  bank  to  an  agent  under  power  of  attor- 
ney after  the  priiicipal's  death  does  not  bind 
the  estate,  although  the  bank  was  ignorant 
of  the  death  at  the  time  of  payment.  Under 
the  existing  conditions  of  law  there  is  con- 
siderable danger  and  risk  to  banks  which  pay 
checks  signed  under  power  of  attorney  in  case 
of  unknown  death  of  principal.  Doubtless 
in  many  states  the  courts  would  not  hold  to 
the  rule  of  the  common  law  in  all  its  rigor 
but  would  apply  equitable  principles  and  hold 
that  payment  to  the  attorney  after  death  of 
the  jDrincipal  and  before  notice  thereof  would 
be  valid.  Vol.  4,  p.  558,  March,  1913.  See 
451,  1074. 

Transfer  of  stock  of  decedent 
See  1340 

463.  (N.  J.)  A  bank  holds  stock  as  col- 
lateral security  for  a  loan  made  to  a  person 
since  deceased,  with  power  to  transfer  on  the 
back  of  the  certificate,  duly  executed  by  the 
decedent.  The  bank  is  about  to  transfer  but 
is  advised  that  new  powers  must  be  executed 
by  the  administrator  of  the  estate,  since  the 
death  of  the  principal  terminated  the  bank's 
authority.  Opinion:  Bank  holding  stock  as 
security  for  loan  with  power  to  transfer  on 
back  of  certificate,  has  right  to  transfer  of 
stock  notwithstanding  death  of  borrower, 
since  power  to  transfer  being  coupled  with  an 
interest  is  not  revoked  by  death  of  the  giver  of 
the  power.     Vol.  10,  p.  466,  Dec,  1917. 

464.  (Okla.)  The  adminstratrix  of  an 
estate  is  entitled  to  the  transfer  of  the  de- 
cedent's stock  upon  delivering  to  the  bank 
an  authenticated  copy  of  the  letters  of  ad- 
ministration, but  where  there  is  no  will  and 
no  administrator  appointed  the  next  of  kin  is 
not  entitled  to  the  transfer  in  the  absence  of 
a  court  order.     Vol.  9,  p.  347,  Nov.,  1916. 


58 


474 


DEPOSITS 


Assignment  of  deposit 


465.  (N.  Y.)  There  is  nothing  in  the 
law  which  will  prevent  a  national  bank  in 
New  York  State  from  making  a  loan  to  a 
depositor  in  a  savings  bank  and  taking  an 
assignment  of  his  deposit  evidenced  by  his 
savings  bank-book  as  security.  But  as  a 
savings  bank-book  is  not  a  negotiable  instru- 
ment, notice  of  the  assignment  should  be 
given  to  the  savings  bank  to  safeguard  it 
against  subsequent  withdrawals,  which  might 
be  effected  by  the  depositor  upon  the  claim  of 
loss  without  production  of  the  book.  Vol.  9, 
p.  50,  July,  1916. 

466.  (Ore.)  In  the  case  where  a  depos- 
itor has  been  paid  a  savings  deposit  under 
false  claim  of  loss,  an  assignee  to  whom  the 
depositor  had  assigned  his  deposit  would  have 
no  rights  against  the  bank.  A  savings  pass- 
book is  not  a  negotiable  instrument  and  an 
assignee  takes  no  greater  rights  than  the  as- 
signor.    Vol.  9,  p.  826,  April,  1917. 

467.  (Pa.)  A  deposit  account  in  a  na- 
tional bank  or  a  trust  company  may  be  as- 
signed by  the  depositor  like  any  other  debt  or 
chose  in  action,  and  the  assignment  is  Ijinding 
upon  the  bank  when  notified  thereof.  Vol. 
6,  p.  435,  Dec,  1913. 

Use  of  assumed  name 

468.  (Cal.)  A  woman,  married  a  second 
time,  desired  to  open  an  account  in  a  bank 
under  her  former  name.  Opinion:  It  would 
be  lawful  and  proper  to  receive  the  married 
woman's  account  under  her  former  name, 
provided  the  purpose  is  honest  and  not  fraud- 
ulent.    Vol.  7,  p.  898,  May,  1915. 

Bank  not  obliged  to  receive  deposits 

469.  (N.  J.)  A  bank  is  under  no  obli- 
gations to  receive  deposits  from  undesirable 
persons  and  may  close  an  accoimt  at  any  time 
it  chooses  by  tendering  to  the  depositor  the 
amount  due  and  declininii'  to  receive  more. 
A'ol.  5,  p.  590,  ]\rarch,  19 13. 

470.  (Ala.)  A  customer  opened  a  small 
checking  account  with  a  ])ank.  The  bank 
later  discovered  that  the  customer  was  a  pro- 
fessional forger  and  questions  its  legal  right 
to  close  the  account.  Opinion:  A  l)ank,  un- 
like a  common  carrier,  has  power  to  select 
its  customers  and  may  refuse  to  receive  a 
deposit  of  a  particular  customer  or  can  close 


an  account  out  at  anv  time  bv  tendering  the 
amount  due.     Vol.  4,^p.  G88,  May,  1912. 

Banks  as  depositaries 

Ste  210 

471.  (Wash.)  Moneys  belonging  to  In- 
dians on  Reservations  under  the  supervision 
of  an  agency  may  be  deposited  in  either  state 
or  national  banks  which  submit  bids  therefor, 
giving  the  rates  of  interest  on  open  accounts 
and  time  deposits  and  otherwise  complying 
with  certain  requirements.  Vol.  7,  p.  689, 
March,  1915. 

Deposit   for   safe-keeping 

472.  (Wis.)  A  bank  which  undertakes 
the  safe-keeping  of  securities  or  valuables  for 
a  customer,  either  gratuitously  or  for  hire, 
as  by  receiving  rental  of  safe  deposit  boxes, 
is  not  an  insurer  against  loss  by  fire,  burglary 
or  theft,  but  in  the  absence  of  special  contract 
of  hire  which  would  define  the  terms  of  lia- 
bility is  under  duty  to  exercise  reasonaljle  care 
in  the  safe  keeping  of  property.  Where  the 
bank  is  a  gratuitous  bailee  it  is  responsible  for 
gross  negligence,  and  where  it  receives  com- 
pensation it  is  responsible  for  ordinary  neg- 
ligence. Vol.  5,  p.  065,  April,  1913.  See 
186. 

Nature  of  deposit  slip 

473.  (Ala.)  B  deposited  in  a  bank  $:  3.- 
44,  and  transferred  to  D  a  deposit  ticket, 
which  read :  "deposited  and  pending  settle- 
ment with  D."  B  claimed  he  owed  D  $55.44, 
wliereas  D  claimed  B  owed  him  $73.44.  The 
bank  refused  to  honor  the  deposit  ticket  pre- 
sented by  D.  Opinion:  A  deposit  slip  given 
l)y  a  bank  to  a  depositor  is  simply  an  ack- 
nowledgment of  the  receipt  of  money  and  its 
delivery  by  the  depositor  to  a  third  person 
does  not  operate  to  assign  the  deposit.  Vol. 
8,  p.  806,  March,  1916. 

474.  (N.  Dak.)  A  duplicate  deposit 
slip  showing  a  deposit  of  $10  currency  was 
issued  to  a  depositor  who  checked  against  the 
account  and  obtained  cash  from  A,  thereby 
exhausting  the  credit.  Thereafter  the  depos- 
itor meets  B  and  obtains  $10  cash  from  him 
on  the  original  deposit  slip.  Opinion:  B 
cannot  hold  the  bank.  The  duplicate  deposit 
slip  is  merely  evidence  of  a  receipt  of  de- 
posit on  a  stated  date.  It  is  not  a  binding 
obligation  or  promise  of  the  bank  to  pay  the 


59 


475] 


DIGEST  OF  LEGAL  OPINIONS 


amount  to  the  transferee  of  the  deposit  slip, 
like  a  negotiable  certificate  of  deposit.  Vol. 
5,  p.  176,  Sept.,  1912. 

475.  (N.  M.)  The  payee  of  a  check 
leaves  it  with  the  teller  of  the  drawee  hank 
for  safe  keepin<i^  and  states  it  is  not  to  l)e  pre- 
sented for  a  few  days  })cnding  the  consum- 
mation of  a  contract  hetwoen  tlie  drawer  and 
the  payee.  The  teller  issues  a  deposit  slip 
therefor  but  does  not  credit  the  check  to 
the  payee's  account  and  afterwards  the  con- 
tract fails  of  consummation  and  the  drawer 
does  not  provide  funds  suiTicient  to  cover  the 
chock.  Tlic  bank  asks  if  it  is  liable  on  ac- 
count of  having  given  the  deposit  ticket,  for 
checks  drawn  by  the  payee.  Opinion:  The 
bank  is  not  lial)le  for  the  amount  to  the  payee 
and  has  the  right  to  refuse  payment  of  the 
latter's  check  drawn  against  such  conditional 
deposit.  The  deposit  slip  is  in  the  nature  of 
a  mere  receipt  subject  to  explanation.  Vol. 
10,  p.  782,  May,  1918. 

476.  (Okla.)  A  deposit  ticket  or  entry 
of  deposit  in  a  pass-book  made  by  one  in 
authority  in  the  bank  is  evidence  that  the 
amount  has  been  received  as  a  deposit  by  the 
bank  at  the  time  stated,  but  like  any  other 
receipt  it  is  only  prima  facie  and  not  con- 
clusive evidence,  and  may  be  explained  by 
other  evidence  or  shown  to  have  been  issued 
by  mistake.  It  is  not  a  binding  obligation 
or  promise  of  the  bank  to  pay  the  amount. 
Vol.  3,  p.  677,  May,  1911. 

Disclosure   of  customer's  balance 
See  172  et  seq.,  503 

477.  (La.)  Where  a  check  was  pre- 
sented and  refused  for  insufficient  funds,  the 
bank  is  not  obliged  to  disclose  the  amount  to 
the  credit  of  the  customer  by  making  part 
pajTuent  nor  to  receive  from  the  holder  or 
anyone  other  than  the  drawer  or  his  agent,  a 
deposit  sufficient  to  make  the  check  good. 
Vol.  7,  p.  896,  May,  1915. 

Deposit  by  one  person  crediting  account 
of  another 

478.  (Ark.)  Money  is  deposited  in  a 
bank  by  A  to  the  credit  of  B  with  instructions 
to  pay  on  check  of  A.  The  bank  seeks  to 
know  whether  it  can  without  liability  cash  A's 
checks  in  the  absence  of  authority  from  B  to 
honor  such  checks.  Opinion:  Where  money 
is  deposited  in  a  bank  by  A  to  the  credit  of  B 
with  instructions  to  pay  on  check  of  A,  the 
bank  can  safely  honor  A's  check  only  in  the 
event  it  is  assured  the  deposit  belongs  to  A 


and  has  been  put  in  B's  name  simply  for  con- 
venience. If  the  money  Ijolongs  to  B  and 
has  been  deposited  by  A  as  his  agent,  tlie  bank 
cannot  safely  pay  A  without  express  author- 
ity from  B.  It  would  Ite  unsafe  for  bank  to 
pay  A  without  first  ascertaining  the  true 
owner  of  the  money.  Vol.  11,  p.  171,  Sept., 
1918. 

479.  (N.  J.)  Where  a  bank  carries  a  de- 
posit to  the  credit  of  "A  Agent"  for  certain 
heirs.  Opinion  that  upon  death  of  A  his 
agency  is  revoked  and  deposit  is  payable  to 
A's  principals  and  not  to  his  administrator. 
Rule  is  different  where  deposit  is  in  name 
of  "A  trustee  for  B,"  in  which  case  it  may  be 
paid  to  administrator  of  A,  except  where 
changed  by  statute.  Vol.  6,  p.  273,  Oct., 
1913. 

Guaranty  fund  of  depositors 

480.  (Okla.)  Where  a  deposit  in  an  Ok- 
lahoma state  bank  represented  by  interest- 
bearing  certificate  is  included  in  the  daily 
average  upon  which  annual  assessment  is 
levied,  and  it  bears  no  greater  rate  of  interest 
than  is  permitted  by  the  Commissioner,  the 
depositor  is  protected  by  the  Depositor's 
Guaranty  Fund  equally  as  if  his  deposit  is  on 
open  account  subject  to  check.  Vol.  7,  p. 
581,  Feb.,  1915. 

Deposit  made  outside  of  bank 

481.  (Md.)  A  depositor  on  his  way  to 
the  bank  delivered  to  one  of  the  bank  clerks 
a  deposit  consisting  of  cash  and  checks  tied 
up  in  a  package.  When  the  clerk  arrived  at 
the  bank,  it  was  discovered  that  there  was 
$100  less  than  the  amount  indicated  on  the 
deposit  slip.  The  depositor  claims  that  the 
full  amount  was  turned  over  and  that  the 
bank  should  stand  the  loss.  Opinion:  It  is 
essential  that  a  depositor  should  deliver  his 
deposit  at  the  bank  to  one  authorized  to  re- 
ceive same,  and  if  he  delivers  the  deposit  to 
an  officer  or  agent  away  from  the  bank,  he 
makes  the  latter  his  o^vn  agent  and  takes  the 
risk  of  the  monev  reaching  the  bank  to  his 
credit.     Vol.  11,  p.  43,  July,  1918. 

482.  (Pa.)  A  customer  claimed  to  have 
given  the  cashier  of  a  bank  a  deposit  of  money 
away  from  the  bank,  which  is  denied  by  the 
cashier.  The  customer  had  no  receipt  for 
the  deposit.  Opinion:  The  customer  cannot 
hold  the  bank  liable  because  (1)  it  is  difficult 
to  prove  the  receipt  of  the  money  by  the  cash- 
ier and  even  if  proved  (2)  the  cashier  had 
no  authority  to  receive  deposits  away  from 


60 


DEPOSITS 


491 


the  bank,  according  to  the  weight  of  judicial 
opinion,  and  the  bank  is  not  liable  unless  the 
money  was  delivered  to  the  bank  to  the  credit 
of  the  customer's  account.  Vol.  4,  p.  210, 
Oct.,  1911. 

Deposit  of  military  company 

483.  (Iowa.)  Funds  of  a  military  com- 
pany are  deposited  in  a  bank  under  the  name 
"Company  Fund— (Officer's  Name)."  The 
officer  is  transferred  to  another  company  and 
the  regiment  is  miles  away.  The  new  com- 
manding officer  writes  the  bank  for  a  state- 
ment of  the  account.  Opinion:  Where  the 
fimds  of  a  military  company  are  deposited  in 
a  bank  by  its  commanding  officer  and  such 
officer  is  succeeded  by  a  new  commander,  the 
latter  is  entitled  to  control  the  deposit  as  the 
representative  of  the  company.  It  would 
seem  perfectly  proper  to  send  the  new  com- 
mander a  statement  of  the  accoimt,  but  the 
bank  should  have  satisfactory  evidence  of  his 
authority  to  control  the  fund.  Vol.  11,  p. 
94,  Aug.,  1918. 

Mistaken  payment  of  deposit 
See  1052  et  seq 

484.  (Mont.)  Where  a  bank  erroneous- 
ly credited  its  depositor  with  $G00,  which 
the  depositor  drew  out,  it  is  not  precluded 
from  suing  and  recovering  judgment  against 
him  for  the  amount,  provided  it  can  prove 
the  mistake.     Vol.  3,  p.  523,  March,  1911. 

485.  (Pa,)  Wliere  a  bank  credits  a  de- 
posit to  the  wrong  account  and  the  amount  is 
checked  out,  the  bank  can  recover  the  amount 
from  the  depositor  as  having  been  paid  l)y 
mistake,  without  consideration.  Vol.  5,  p. 
106,  Aug.,  1912. 

Payment  on  oral  order 

486.  (Colo.)  A  having  an  account  in 
bank  came  to  the  bank  in  person  and  ver- 
bally in  the  presence  of  the  bank  officials 
ordered  the  bank  to  jiay  B  $300  after  certain 
conditions  were  complied  with.  The  condi- 
tions were  performed  and  B  was  paid  the 
money,  A  claimed  that  the  oral  order  was 
not  binding  and  should  have  been  in  writing. 
Opinion:  The  bank  is  entitled  to  require  a 
check  or  other  written  order  from  the  custom- 
er to  pay  a  deposit,  but  if  it  is  willing  to  and 
does  pay  on  the  customer's  oral  order,  the 
payment  is  valid  and  chargeable,  assuming 
the  bank  can  prove  such  order.  Vol,  5,  p. 
827,  June,  1913. 


Deposit  by  partnership 
See  334,  708 

487.  (Cal,)  Under  the  firm  name  of 
"Smith  Bros,"  a  partnership  opened  an  ac- 
count in  a  bank.  By  agreement  with  the 
bank  the  signature  "Smith  Bros,"  was  to  be 
used  on  all  checks  and  notes,  drawn  by  either 
partner.  Opinion:  The  signature  "Smith 
Bros,"  as  the  firm  name  to  checks  and  notes 
is  legally  sufficient  without  adding  the  name 
of  the  individual  partner  who  signs  the  firm 
name.     Vol,  5,  p.  26,  July,  1912. 

488.  (Wash.)  A  and  B  are  partners 
and  open  an  account  in  a  bank  in  the  name 
of  "The  Star  Grocery,"  subject  to  the  signa- 
ture of  A  or  B.  A  dies.  Opinion:  B  can 
draw  checks  against  the  partnership  account 
and  the  bank  would  not  be  liable  to  the  heirs 
of  A  for  the  money  thus  paid.  Vol.  7,  p. 
581,  Feb.,  1915. 

Postal  savings 

489.  (111.)  State  banks  which  are  non- 
members  of  the  Federal  reserve  system  may 
be  depositories  of  postal  savings  funds  under 
certain  specified  conditions,  namely,  if  mem- 
ber banks  fail  to  qualify  to  receive  such  de- 
posits or  in  the  event  there  are  no  member 
banks  in  the  same  city;  otherwise,  where 
there  are  one  or  more  member  banks  in  the 
city  where  postal  savings  deposits  are  made, 
the  law  provides  that  such  deposits  shall  be 
placed  in  such  qualified  member  banks.  Vol. 
10,  p.  379,  Nov.,  1917. 

Note:  The  law  at  the  present  time  remains  un- 
changed. 

490.  (Wis.)  The  law  of  Wisconsin 
prohibits  a  bank  from  pledging  its  assets  as 
security  for  deposits.  It  is  somewhat  doubt- 
ful whether  bonds  borrowed  l)y  the  bank  could 
be  lawfully  pledged  as  security  for  postal 
savings  deposits.     Vol.  4,  p,  153,  Sept,,  1911. 

Public  deposits 

491.  (Ky,)  A  national  bank  to  secure 
public  deposits  deposited  United  States  cou- 
pon bonds  with  the  Treasurer  of  the  United 
States,  The  Treasurer  without  the  consent 
of  tbe  national  bank  cancelled  the  coupon 
bonds  and  substituted  registered  bonds,  tbere- 
by  causing  the  bank  an  actual  loss  of  $350, 
Opinion:  No  statutory  authority  exists  to 
convert  the  coupon  bonds  into  registered 
bonds  as  in  the  case  of  bonds  to  secure  circu- 
lation. In  the  absence  of  an  authorizing 
statute  or  the  express  consent  of  the  depos- 
itor   of    the    bonds,    the    conversion    would 


61 


492 


DIGEST  OF  LEGAL  OPINIONS 


afford  a  basis  of  a  claim  for  damages. 
8,  p.  1015,  May,  1916. 


Vol. 


Reserve   against   savings   deposits 

492.  (Wash.)  Under  the  banking  law 
of  Washington  all  banks  are  required  to  main- 
tain a  reserve  of  twenty  per  cent,  of  their  de- 
mand liabilities.  The  state  examiner  holds 
savings  deposits  to  be  demand  liabilities  and 
the  banks  carrying  savings  deposits  question 
this  ruling,  for  wliile  savings  deposits  are  in 
a  sense  demand  liabilities,  they  can  be  held 
subject  to  notice  of  withdrawal.  Opinion:  A 
construction  of  the  law  that  a  savings  deposit 
subject  to  notice  is  not  a  demand  liability  is 
not  unreasonable  in  view  of  the  purpose  for 
which  reserve  is  required.  The  opinion  of 
the  Attorney  General  should  be  requested 
construing  the  law,  or,  in  the  event  of  an  un- 
favorable opinion,  the  banking  law  should  be 
amended  expressly  providing  a  separate  and 
smaller  reserve  against  savings  deposits. 
The  ordinary  demand  for  such  deposits  does 
not  warrant  such  a  high  percentage  of  reserve, 
and  the  bank  is  protected  by  its  right  to  re- 
quire notice  of  withdrawal.  Vol.  4,  p.  617, 
April,  1912. 

Note:  The  banking  law  of  Washington  has  been 
amended  (1915)  so  as  to  read:  "Every  bank  and 
trust  company  doing  business  under  this  act,  shall 
have  on  hand  at  all  times  in  available  funds,  not 
less  than  fifteen  per  cent.  ( 15% )  of  its  total  de- 
posits." 

Specific  deposits 

See  2,  393,  787,  1222 

493.  (Fla.)  A  customer  closed  his  ac- 
count and  left  the  sum  of  $350  with  the  bank 
for  the  specific  purpose  of  paying  two  out- 
standing checks,  one  for  $250  and  one  for 
$100.  Afterwards  his  checks  of  $50  and  $75 
were  presented  and  paid,  leaving  insufficient 
funds  to  meet  both  outstanding  checks. 
Opinion:  The  mistake  of  the  bank  in  paying 
the  checks  out  of  the  specific  deposit  was  due 
to  the  action  of  the  customer  and  the  bank 
w^ould  not  be  held  responsible  therefor.  A 
deposit  for  the  purpose  of  paying  specified 
checks  is  no  longei"  a  general  one,  subject  to 
check,  but  is  a  specific  or  trust  deposit,  appli- 
cable solely  to  the  payment  of  such  specified 
checks,  and  not  to  be  appropriated  in  any 
other  manner,  but  in  this  case  payment  was 
justified.     Vol.  2,  p.  21,  July,  1909. 

Mistaken  credit  to  account 

494.  (Ariz.)  A.  Doe,  a  member  of  the 
firm  of  Doe  and  Doe,  and  who  also  conducted 


an  independent  business,  deposited  checks  to 
the  credit  of  the  firm,  but  tlie  bank  mistak- 
enly credited  the  amount  to  A.  Doe's  personal 
account.  Before  the  mistake  was  discovered 
A.  Doe  sold  his  business  to  a  successor,  in- 
cluding his  credit  in  bank.  Opinion:  The 
bank  has  a  right  to  charge  the  amount  back 
to  the  depositor's  account,  unless  the  depos- 
itor, relying  on  the  truth  and  accuracy  of  the 
statement  of  account  rendered  him  by  the 
bank,  is  led  to  act  to  his  detriment  in  a  man- 
ner he  would  not  have  done  but  for  his  faith 
in  the  correctness  of  such  statement,  then  the 
bank  is  bomid  to  stand  the  loss.  The  right  of 
the  bank  to  hold  A.  Doe  liable  would  depend 
on  whether  he  would  be  prejudiced  by  the 
mistake  if  compelled  to  pay  the  money  back. 
Vol.  7,  p.  896,  May,  1915. 

495.  (Miss.)  M  bank  erroneously  cred- 
ited a  deposit  to  N  bank  instead  of  to  H  bank, 
and  rendered  a  statement  of  account  from 
time  to  time  to  H  bank,  which  was  acquiesced 
in  for  seven  years  without  objection,  during 
which  time  N  bank  became  defunct.  Opin- 
ion: After  a  reasonable  time  the  accounts 
rendered  became  accounts  stated,  subject  to 
correction  only  for  fraud  or  mistake.  The 
seven  years'  delay  of  the  H  bank  by  which 
the  M  bank  was  prejudiced  in  its  recourse 
upon  the  N  bank,  was  such  laches  as  would 
preclude  the  H  bank  from  questioning  the 
correctness  of  the  account.  Vol.  7,  p.  386, 
Dec,  1914. 

Giving  cash  instead  of  credit  for  deposited 
item 

496.  (Ore.)  A  depositor  brought  to  the 
bank  for  credit  a  check  for  $550.  After  the 
clerk  at  the  window  made  out  the  deposit 
ticket,  the  depositor  asked  for  $250  cash 
to  be  taken  out  of  the  check  and  returned 
to  him.  The  clerk  thereupon  wrote  upon 
the  deposit  ticket  "cash  $250''  and  sub- 
tracted that  amount,  leaving  a  total  of  $300, 
^vhich  amount  was  placed  to  the  credit  of 
the  customer.  The  bank  afterwards  delivered 
to  him  his  balanced  pass-book  showing  the 
amount  credited  and  the  depositor  retained 
the  book  for  over  a  3ear  without  objection. 
Afterwards  he  denied  receiving  the  $250  cash. 
Opinion :  The  fact  that  the  customer  retained 
the  balanced  pass-book  for  over  a  year  with- 
out objection  makes  the  balance  an  account 
stated,  which  is  conclusive  unless  the  depos- 
itor can  show  fraud,  mistake  or  omission.  If 
the  depositor  impeaches  the  account,  the  bank 
can  show  facts  connected  with  the  deposit. 
In  cases  where  a  customer  at  the  time  of  de- 


62 


DEPOSITS 


503 


posit  wants  the  whole  or  part  cash,  it  would 
be  better  for  the  bank  to  enter  credit  for  the 
entire  deposit  and  have  the  customer  draw  a 
check  for  the  cash  in  the  regular  way.  Vol. 
5,  p.  28,  July,  1912. 

Time  deposits 

See  282 

497.  (Pa.)  A  savings  deposit  evidenced 
by  pass-book  requiring  thirty-five  days* 
notice  of  withdrawal  but  providing  that  the 
bank  may  waive  the  notice,  is  a  time  deposit 
within  the  definition  of  Section  19  Federal 
Eeserve  Act  as  further  defined  by  Regulation 
D,  Series  of  1916,  But  a  certificate  of  de- 
posit payable  on  return  and  "thirty-five  days 
demand  if  required"  is  not  a  time  certificate 
as  defined  by  Eegulation  D,  although  a  court 
might  hold  that  it  came  within  the  definition 
of  time  certificates  provided  by  Section  19  of 
the  Act     Vol.  9,  p.  907,  May,  1917. 

Trust  funds 
See  410,  432,  668,  1191 

498u  (Ark.)  Dfeposits  skve  held  by  a 
trust  company,  acting  as  executor,  guardian 
and  depository.  In  the  event  of  failure,  the 
tendency  of  the  courts  is  to  class  such  de- 
posits as  general  indebtedness  and  not  to  give 
the  claimant  a  preference  unless  (1)  such 
funds  are  kept  separate  and  specially  marked 
as  trust  funds,  or  (2)  where  the  organic  law 
provides  that  funds  so  held  shall  be  preferred 
to  commercial  deposits  or  general  creditors. 
In  Arkansas  the  beneficiary  would  only  come 
in  for  a  pro  rata  share  with  the  other  depos- 
itors, unless  the  funds  were  kept  separate  and 
marked  as  trust  funds.  Vol.  7,  p.  98,  Aug., 
1914. 

499.  (N.  J.)  Under  a  decision  of  the 
New  York  Court  of  Appeals  a  deposit  by  A  in 
trust  for  B  is  revocable  at  will  until  the  de- 
positor dies,  or  unless  he  completes  the  gift 
in  his  lifetime  by  some  unequivocal  act  such 
as  delivery  of  the  pass-book  or  notice  to  the 
beneficiary.  Under  a  New  Jersey  decision, 
such  deposit  in  trust  was  held  testamentary 
in  character  and  would  not  be  effectual  unless 
made  in  accordance  with  the  statute  of  wills. 
Vol.  3,  p.  334,  Dec,  1910. 

500.  (N.  Y.)  A  bank  carrying  an  ac- 
count for  John  Doe,  Trustee,  or  John  Doe, 
Agent,  does  not  inquire  as  to  the  identity  of 
the  cestui  que  trust  or  principal,  nor  as  to 
the  extent  of  John  Doc's  authority.  Th(( 
question  arises  whether  banks   are   safe   in 


carrying  such  accounts  without  making 
inquiry.  Opinion:  It  is  unlikely  the  New 
York  courts  will  go  to  the  extent"  of  holding 
that  where  John  Doe  deposits  checks  payable 
to  himself  as  agent  or  trustee,  the  bank  is 
under  duty  of  inquiry  for  whom  he  is  acting 
or  the  extent  of  his  powers ;  the  presumption, 
according  to  the  weight  of  authority  else- 
where, is  that  Doe  is  acting  honestly  and 
within  his  powers.  It  would  be  only  where 
the  bank  has  knowledge  of  additional  facte, 
as  where  a  trustee  check  is  g4ven  for  a  person- 
al debt  to  the  bank,  or  where  two  accounts, 
an  individual  and  trustee,  are  carried,  and  a 
deficit  in  the  individual  is  made  good  from 
the  trustee  account,  or  where  there  are  other 
suspicious  facts,  that  the  bank  would  be  put 
upon  inquiry.  But  it  might  be  safer,  in  view 
of  the  uncertainty  in  the  New  York  law,  es- 
pecially where  numerous  transactions  arp 
carried  through  such  an  account,  to  make  in- 
quiry as  to  the  person  for  whom  Doe  is  acting 
and  the  extent  of  his  authority.  Vol.  5,  p. 
440,  Jan.,  1913.  See  328  et  seq,  Official 
checks  for  private  use. 

501.  (Pa.)  Under  the  laws  of  North 
Carolina,  guardians,  trustees  and  other  fidu- 
ciaries may  invest  trust  funds  in  United 
States  securities  and  in  consolidated  bonds  of 
the  state.     Vol.  3,  p.  468,  Feb.,  1911. 

Deposit  in  two  names 

See  1012 

502.  (N.  J.)  Where  a  deposit  is  made 
in  two  names  the  certificate  of  deposit  or 
pass-book  should  read  payable  to  A  or  B  or 
survivor,  and  under  the  law  of  New  Jersey 
applicalde  to  banks,  trust  companies  and  sav- 
ings banks,  the  institution  is  authorized  to 
pay  the  survivor  without  administration. 
Vol.  3,  p.  587,  April,  1911. 

Unclaimed  deposits  required  to  be  pub- 
lished 
See  172  et  scq.,  477 

503.  (N.  M.)  A  Now  ^fexico  statute 
rciiuiros  national  and  state  banks  to  publish 
lists  of  doniiant  and  unclaimed  deposits,  with 
a  view  to  informing  tlie  heirs  of  deceased  de- 
positors of  sucli  deposits,  failing  which  it 
provides  escheat  of  the  money  to  the  state. 
Opinion:  The  state  is  probably  without  the 
power  to  enforce  such  a  statute  against  the 
national  hanks.  In  its  application  to  state 
banks,  tlio  statute  is  probably  constitutional, 
thougli  it,s  valid  it  v  is  not  entirelv  free  from 
doubt.     Vol.  6,  p.'  753,  May,  1914. 


63 


504 


DIGEST  OF  LEGAL  OPINIONS 


Notice  of  withdrav/al  of  savings  deposit 
in  national  bank 

504.     (Pa.)     There  is  nothing  in  the  Na- 
tional Bank  Act  which  denies  the  right  of  a 


national  bank  to  rcfu.se  payment  on  demand 
and  require  thirty  days'  notice  Ijcfore  with- 
drawal of  a  savings  deposit  where  the  pass- 
})ook  rules  provide  for  such  notice.  Vol.  6, 
p.  95,  Aug.,  1913.     See  283. 


DISHONOR 

See  Presentment  of  Instrument  with  Indorsement  Lacking,  1131-1134: 


Drawer's  liability  on  unpaid  draft 

505.  (Kan.)  A  bank  in  Kansas  pur- 
chased a  sight  draft  on  a  Nebraska  bank. 
The  draft  was  drawn  by  a  depositor  of  the 
Nebraska  bank  but  was  signed  in  his  name 
at  his  request  by  his  cousin,  who  was  a  cus- 
tomer of  the  Kansas  bank.  The  draft  was 
dishonored.  Opinion:  The  Kansas  bank  has 
recourse  upon  the  drawer  only,  and  not  upon 
its  customer  who  introduced  the  drawer  and 
signed  the  drawer's  name  to  the  draft  on  the 
latter's  request.     Vol.  5,  p.  108,  Aug.,  1912. 

Wrongful  dishonor  of  checks 

See  1268 

Note:  The  following  law  recommended  by  the 
American  Bankers  Association  has  been  passed  in 
the  states  below  named:  "No  bank  shall  be  liable 
to  a  depositor  because  of  the  non-payment  through 
mistake  or  error  and  without  malice  of  a  check 
which  should  have  been  paid,  unless  the  depositor 
shall  allege  and  prove  actual  damage  by  reason 
of  such  non-payment  and  in  such  event  the  liabil- 
ity shall  not  exceed  the  amount  of  damage  so 
proved."  1915,  Idaho,  Montana,  New  Jersey,  Ore- 
gon; 1917,  Californiaj  1919,  Michigan,  Missouri, 
North  Carolina,  Ohio,  West  Virginia. 

506.  (111.)  Where  a  bank  through  error 
and  without  malice  refuses  to  pay  the  check 
of  a  customer  dra^vn  against  suflRcient  funds, 
all  the  courts  which  have  passed  on  the  ques- 
tion except  those  of  New  York  hold  that  the 
customer,  if  a  merchant  or  trader,  may  re- 
cover substantial  damages  without  proving 
actual  damage.  Where  the  customer  is  a 
non-trader  most  cases  require  proof  of  sub- 
stantial damage  as  a  basis  of  recovery.  The 
best  method  to  abrogate  the  rule  that  sub- 
stantial damages  will  be  presumed  without 
proof  of  actual  damage  would  be  in  procuring 
legislation  which  will  provide  that  damages 
will  be  limited  to  such  as  the  customer  can 
prove.  For  collection  of  cases  see  Vol.  4, 
p.  755,  June,  1912. 

Note:  For  legal  decisions  on  this  subject  see 
Vol.  6,  p.  433,  Dec,  1913. 

507.  (111.)  A  bank  through  error  and 
without  malice  refused  to  pay  its  customer's 
check  for  $11.40,  although  in  sufficient  funds. 
The  clieck  was  presented  a  second  time  and 


paid  at  the  request  of  the  payee,  who  stated 
that  the  drawer's  credit  with  him  was  not 
damaged.  The  customer  sued  tlie  bank  for 
$1,000  damages.  Opinion:  Assuming  that 
the  customer  was  a  merchant  or  trader,  the 
bank  would  probably  be  held  liable  for  sub- 
stantial damages,  without  proof  of  actual 
damage  or  any  malice  on  the  part  of  the 
banl'.     Vol.  4,  p.  755,  June,  1912. 

508.  (La.)  A  depositor  who  was  in  the 
habit  of  overdrawing  his  account  made  a 
small  deposit,  for  which  a  credit  slip  was 
placed  on  file.  Later  in  the  day  a  check  was 
presented  and  payment  refused  although 
drawn  against  sufficient  funds.  Opinion: 
Assuming  that  the  depositor  was  a  trader,  he 
can  recover  damages  for  dishonor  of  the 
check  without  proving  special  damage,  but 
the  fact  that  he  had  been  in  the  habit  of  over- 
drawing his  account  could  be  used  in  mitiga- 
tion of  damages.     Vol.  5,  p.  832,  June,  1913. 

509.  (Miss.)  A  bank,  through  a  mis- 
talce  in  its  bookkeeping,  refused  the  pajment 
of  two  checks  of  its  depositor,  one  for  $10, 
another  for  $"?5.  The  depositor  sued  the 
bank  for  $10,000  for  not  paying  his  checks 
when  there  were  sufficient  funds.  Opinion: 
The  bank  was  liable  to  the  depositor  (1)  if  a 
merchant  or  trader,  for  substantial  damages 
though  no  actual  damage  is  proved;  (2)  if 
not  a  merchant  or  trader,  for  such  actual 
damages  as  are  alleged  and  proved.  Vol.  7, 
p.  222,  Oct.,  1914. 

510.  (Pa.)  A  customer  who  was  a  car- 
penter threatened  suit  against  a  bank  for  fail- 
ure to  pay  a  check  drawn  against  sufficient 
fimds.  The  bank  credited  a  deposit  by  the 
customer  to  the  wrong  account  through  a 
clerical  error.  Opinion:  Where  a  check  is 
refused  payment  because  of  clerical  error,  and 
the  depositor  is  a  merchant  or  trader,  sub- 
stantial damages  are  by  most  courts  presumed 
without  his  proving  actual  damages,  but 
where  a  non-trader,  some  courts  hold  he  must 
prove  actual  damage  to  recover  anything 
rnore  than  nominal  damages.  In  Pennsyl- 
vania the  question  has  not  been  passed  upon. 
Vol.  6,  p.  210,  Sept.,  1913. 


64 


FORGERY 


517 


511.  (S.  C.)  A  bank  received  for  de- 
posit from  its  customer  a  check  drawn  on  a 
small  country  bank,  and  it  immediately  sent 
the  item  to  its  correspondent  bank  for  collec- 
tion. The  check  was  returned  unpaid  by  the 
correspondent  and  the  bank  collected  the 
amount  from  its  depositor  who  in  turn  col- 
lected the  amount  from  the  drawer.  It  after- 
wards developed  that  the  check  had  never 
been  presented.  The  drawer  claims  damages 
for  wrongful  dishonor  of  the  check  on  ground 


that  check  was  never  presented.  Opinion: 
Where  a  check  which  has  never  been  presented 
is  returned  unpaid,  implying  lack  of  funds, 
there  is  an  injury  to  the  credit  of  the  drawer 
for  which  the  holder  will  be  responsible  to 
him  in  damages.  In  this  case  the  bank 
would  be  held  liable  to  the  drawer  for  the 
wrongful  act  of  its  correspondent  and  in  turn 
Avould  have  recourse  on  such  correspondent 
whose  act  caused  the  injury.  Vol.  10,  p. 
3?  a,  Nov.,  1917. 


FORGERY 

See  Altered  and  Raised  Paper,  82-110 


Note:  A  statute  recommended  by  the  American 
Bankers  Association,  limiting  the  time  of  liabil- 
ity of  a  bank  to  its  depositor  for  payment  of 
forged  or  raised  checks,  the  time  limit  ranging 
from  thirty  days  to  one  year  after  the  return  of 
the  paid  vouchers  to  the  depositor,  or  in  some 
states  after  notice  that  they  are  ready  for  de- 
livery has  been  passed  in  the  following  states: 
California,  Idaho,  Iowa,  Kansas,  Louisiana, 
Maine,  Massacliusetts,  Michigan,  Minnesota, 
Missouri,  Montana,  Nebraska,  Nevada,  New 
Jersey,  New  York,  North  Carolina,  North  Da- 
kota, Ohio,  Oregon,  Rhode  Island,  South  Dakota, 
Vermont,  Washington,  West  Virginia,  Wisconsin 
and  Wyoming. 


Bank  bound  to  know  depositor's 

signature 

See  280,  561,  563 

512.  (Iowa.)  A  bank  is  bound  to  know 
the  indorsement  of  its  depositor  as  payee  of 
a  certificate  of  deposit,  similarly  as  in  the  case 
of  a  signature  on  a  check,  and  cannot  recover 
money  paid  to  a  bona  fide  holder  on  the  for- 
gery thereof.  But  this  rule  is  based  on  and 
limited  to  cases  where  the  bank  keeps  a  file  of 
the  signatures  of  depositors  to  whom  certif- 
icates are  issued,  and  where  such  signatures 
are  not  kept  the  rule  would  not  apply,  and 
money  paid  on  a  forged  indorsement  would 
be  recoverable.     Vol.  6,  p.  501,  Jan.,  1914. 

513.  (Kan.)  The  rule  that  a  drawee  is 
bound  to  know  the  drawer's  signature  and 
cannot  recover  money  paid  to  a  bona  fide  hold- 
er on  forgery  thereof  is  supported  by  the  fol- 
lowing two  underlying  reasons:  (1)  The 
drawee  is  in  a  better  position  than  the  holder 
to  judge  as  to  the  genuineness  of  the  drawer's 
signature.  (2)  The  drawee  bank  should  be 
regarded  as  the  place  of  final  settlement  of  the 
transaction  of  payment.  A  stipulation  on 
the  face  of  the  instrument  providing  that 
"All  indorsers  guarantee  that  the  maker's  sig- 
nature is  genuine"  does  not  alFect  the  nego- 
tiability of  the  instrument,  but  extends  the 


existing  liability  of  the  indoreer  upon  a 
forged  check  to  subsequent  holders  to  the 
drawee.     Vol.  7,  p.  584,  Feb.,  1915. 

514.  (N.  H.)  The  Massachusetts  deci- 
sions adhere  with  certain  modifications  to  the 
old  rule  established  in  the  case  of  Price  v, 
Xeal,  3  Burrows  1354,  that  the  drawee  of  a 
draft  is  bound  to  know  the  drawer's  signature, 
and  is  precluded  from  recovering  money  paid 
to  an  innocent  holder  upon  a  forgerv  thereof. 
Vol.  3,  p.  146,  Sept.,  1910  . 

515.  (Ohio.)  A  bank  is  bound  to  know 
the  indorsement  of  its  depositor  as  payee 
of  a  certificate  of  deposit,  similarly  as  in  the 
case  of  the  signature  on  a  check.  Where  a 
bank  paid  a  certificate  of  deposit  upon  tJie 
forged  indorsement  of  its  depositor  as  pavce, 
it  is  liable.     Vol.  6,  p.  89,  Aug.,  1913. 

516.  (Pa.)  On  June  17  a  customer 
deix)sited  a  check  drawn  on  the  Scranton 
bank  payable  to  the  order  of  "cash"  and 
signed  and  indorsed  with  the  name  of  A.  B. 
Jr.,  which  })rovcd  to  be  forged.  On  July  1 
the  bank  receiving  payment  was  notified  and 
asked  to  refund.  Opinion:  The  rule  that  the 
drawee  is  bound  to  know  the  drawer's  signa- 
ture and  cannot  recover  money  paitl  on  the 
forgery  thereof,  has  been  changed  by  a  statute 
in  Pennsylvania  passed  in  1840,  permitting 
recovery  where  there  has  been  due  diligence 
in  the  discovery  and  notice  of  flie  forgery. 
In  this  case  the  drawee  used  due  diligence. 
The  Xegotiablo  Instruments  Act  has  been 
held  in  a  recent  case  not  to  have  repealed  the 
Act  of  1849.     Vol.  7,  p.  105,  Aug.,  1914. 

517.  (S.  Dak.)  A  bank  received  its  de- 
positor's check  of  $1,G00  and  as  a  condition 
of  jiayment  required  that  the  drawer's  signa- 
ture I)e  guaraTiteod  by  the  holder  liank.  Opin- 
ion: Apart  from  the  exceptional  case  where 
a  depositor  cannot  write,  the  bank  has  no 
right  to  require  guaranty  of  the  drawer's  sig- 


65 


518 


DIGEST  OF  l.EUAL  OPINIONS 


nature  to  the  check  as  a  condition  of  payment, 
and  refusal  to  pay  the  genuine  check  without 
such  guaranty  would  be  a  dishonor  for  which 
the  bank  would  be  liable  to  the  drawer.  Pay- 
ment of  the  check,  should  the  signature  prove 
to  be  forged,  even  though  guaranteed  by  the 
holder  bank,  could  not  be  charged  to  the 
drawer's  account.    Vol.  5,  p.  657,  April,  1913. 

Payment  of  forged  check  not  chargeable 
to  drawer 

518.  (Ala.)  A  drew  his  check  for  $27 
to  order  of  "John  Jones.'*  B,  a  merchant, 
cashed  the  check  for  a  merchant  giving  the 
name  of  John  Jones,  and  deposited  and  re- 
ceived credit  for  the  check  with  the  drawee 
bank.  Two  days  later  A  notified  the  bank 
that  the  check  had  been  stolen  and  the  in- 
dorsement was  a  forgery.  B  claims  there 
was  carelessness  on  the  part  of  A  and  objects 
to  being  charged  with  the  amount.  Opinion  : 
The  check  having  been  paid  on  a  forgery  of 
the  indorsement  cannot  be  charged  to  the 
drawer's  account,  and  the  drawee  can  recover 
from  the  person  receiving  payment.  The 
amount  is  therefore  chargeable  to  B.  The 
facts  stated  disclose  no  negligence  on  the  part 
of  A,  which  would  estop  him  from  question- 
ing the  validity  of  the  payment.  Vol.  6,  p. 
760,  May,  1914.. 

Pajnnent  chargeable  where  drawer 
estopped 

519.  (Md.)  A  bank  cashed  a  check 
drawn  by  an  insurance  company  upon  an  in- 
dorsement of  a  fictitious  payee  forged  by  its 
agent  and  cashed  upon  his  identification. 
The  agent  was  in  the  habit  of  identifying  the 
payees  of  the  company's  checks,  and  of  wit- 
nessing their  indorsements.  Opinion:  The 
bank  is  responsible  unless  it  could  be  shown 
that  the  agent  was  acting  within  the  scope  of 
his  authority,  in  which  case  the  company 
would  be  estopped  from  asserting  that  the  in- 
dorsement was  a  forgery.  Vol.  2,  p.  482, 
May,  1910. 

520.  (Minn.)  A  check  was  cashed  for  a 
third  person  by  the  payee  A  in  ignorance  that 
it  bore  his  own  forged  signature  as  drawer 
and  was  deposited  by  him  in  B  bank  and  col- 
lected from  C  bank  upon  which  it  was  drawn, 
A  carrying  an  account  in  both  banks.  Opin- 
ion: The  check  is  chargeable  by  drawee  bank 
to  A's  account,  he  being  estopped  to  assert  the 
forgery  of  his  own  signature.  Vol.  7,  p.  584, 
Feb.,  1915. 


521.  (Ala.)  A  depositor  having  know- 
ledge that  his  signature  was  forged  to  certain 
checks,  which  were  returned  to  him  as  paid 
vouchers  by  tlie  bank,  omitted  for  a  consider- 
able period  of  time  thereafter  to  give  the  bank 
notice.  Opinion:  It  was  the  depositor's  duty 
to  promptly  notify  the  bank  upon  the  discov- 
ery of  the  forgery  of  the  checks.  Neglect  of 
such  duty  relieved  the  bank  of  liability,  if  it 
can  show  resulting  damage,  and  in  some 
jurisdictions  the  bank  is  absolved  from 
liability,  irrespective  of  such  damage.  Vol. 
9,  p.  143,  Aug.,  1916. 

522.  (Neb.)  A  bank  cashed  a  check  of 
$45  signed  by  John  Doe  and  indorsed  by 
Kichard  Roe  and  Peter  Roe.  When  John 
Doe  received  the  cancelled  check  from  his 
bank,  he  discovered  forgery  of  his  signature 
but  did  not  notify  the  bank  until  eight 
months  thereafter.  It  also  developed  that 
Richard  Roe's  indorsement  was  forged.  The 
bank  seeks  to  escape  liability  to  its  depositor, 
or  if  recovery  is  allowed  to  have  recourse  on 
Peter  Roe.  Opinion:  Where  a  bank  pays  a 
forged  check  and  returns  same  to  its  customer 
as  a  voucher  and  the  customer,  after  dis- 
covering the  forgery,  fails  for  eight  months 
to  notify  the  bank  thereof,  the  bank  can 
hold  the  customer  responsible  for  the  amount, 
if  the  unreasonable  delay  has  worked  to 
its  injury.  Wheue  a  bank  pays  a  check 
upon  which  both  drawer's  signature  and 
payee's  indorsement  are  forged,  some  courts 
hold,  and  others  deny,  the  bank  can  recover 
the  money  as  paid  upon  a  forgery  of  the  in- 
dorsement, and  in  Nebraska  the  Supreme 
Court  has  expressed  the  opinion  that  the  rule 
allowing  recovery  in  such  case  is  sound.  In 
this  case  the  bank  could  probably  prove  injury 
caused  by  delayed  notification  and  hold  the 
customer  responsible ;  furthermore  would  have 
right  of  recovery  from  Peter  Roe.  Vol.  11, 
p.  274,  Nov.  1918. 

Check  bearing  forged  and  genuine 
signatures 

523.  (Mo.)  The  treasurer  of  a  corpora- 
tion signed  checks  in  blank  and  left  them  in 
the  drawer  of  the  desk  of  his  confidential 
clerk  for  countersignature  of  the  president 
by  rubber  stamp.  The  desk  drawer  was  ac- 
cessible to  a  bookkeeper  who  wrongfully  ap- 
propriated the  checks,  affixed  the  rubber 
stamp  signature  of  the  president  thereto, 
filled  out  and  negotiated  the  checks  to  a  bank, 
which  collected  the  same  from  the  drawee. 
Opinion:  Under  the  law  of  Missouri  the  cor- 


66 


FORGERY 


531 


poration  is  estopped  by  its  negligence  from 
denying  the  genuineness  of  its  signature,  and 
from  asserting  that  such  checks  never  had  a 
valid  inception  by  delivery.  It  can  hold 
neither  the  purchasing  bank  nor  the  payor, 
but  is  chargeable  with  the  amount  of  such 
checks.  The  facts  here  make  out  a  case  of 
conduct  on  the  part  of  the  corporation  so 
grossly  negligent  as  to  estop  it  from  denying 
the  delivery  of  the  checks  as  completed  in- 
struments.    Vol.  11,  p.  486,  INfarch,  1919. 

524.  (N.  Y.)  A  corporation  check  re- 
quiring the  signature  of  the  treasurer  and  the 
countersignature  of  the  manager  was  signed 
in  blank  by  the  treasurer,  carelessly  exposed, 
then  stolen,  the  countersignature  of  the  man- 
ager forged  and  afterwards  paid  by  the  bank, 
after  it  had  been  cashed  by  another  bank  upon 
the  forgery  of  the  indorsement  of  a  fictitious 
payee.  The  corporation  failed  to  notify  its 
bank  of  the  theft.  Opinion:  While  the  mere 
carelessly  leaving  exposed  of  a  check  book  con- 
taining blank  checks  has  not  Deen  held  re- 
sponsible negligence  on  the  part  of  the  cus- 
tomer, the  leaving  of  such  checks  exposed  con- 
taining the  genuine  signature  of  oiLe  of 
two  officials  required  to  sign,  coupled  with  the 
fact  that  the  customer  did  not  notify  the  bank 
and  place  it  on  its  guard,  might  be  held  suffi- 
cient to  relieve  the  bank  from  the  application 
of  the  general  rule  that  money  paid  on  a 
forged  check  is  not  chargeable  and  to  make 
the  customer  responsible.  Vol.  1,  p.  446, 
June,  1909. 

525.  (Ohio.)  A  bank  paid  a  check  of  a 
corporation  drawn  payable  to  bearer,  signed 
by  the  treasurer,  the  countersignature  of  the 
president  being  forged.  The  check  was 
stolen  and  cashed  by  an  employee.  The 
understanding  between  bank  and  customer 
was  that  all  checks  should  have  both  signa- 
tures. The  bank  questions  as  to  its  right  to 
charge  the  amount  to  the  corporation's  ac- 
count. Opinion :  A  check  signed  by  one  only 
and  bearing  a  forgery  of  the  other  signature 
is  not  an  authority  and  direction  to  the  bank 
to  pay,  and  is  not  chargeable  in  the  absence 
of  negligence  on  the  customer's  part.  Vol. 
1,  p.  448,  June,  1909. 

526.  (Ohio.)  Where  an  instrument  con- 
tains both  forged  and  genuine  signatures  it 
is  valid  in  the  hands  of  a  bona  fide  holder 
as  to  the  makers  whose  signatures  are  gen- 
uine, although  they  are  ignorant  of  tlie  for- 
geries.    Vol.  1,  p.  448,  June,  1909. 


Drawer's  duty  of  examination  and 
verification 

527.  (S.  C.)  A  series  of  checks  covering 
a  period  of  over  a  year,  signed  by  a  wife  pay- 
able to  her  husband,  were  caslied  by  a  bank 
for  the  husband  and  paid  by  the  drawee. 
During  this  time  the  pass-book  was  balanced 
several  times  and  no  olijection  to  the  vouchers 
was  made  by  the  wife.  Three  years  later  she 
claimed  that  all  of  the  checks  were  forgeries. 
Opinion:  The  drawee  is  not  responsible  to 
the  depositor  who  is  estopped  by  the  neglect 
of  duty  to  make  examination  and  give  notice 
of  the  forgeries.  The  bank  receiving  pay- 
ment is  not  liable  because  after  the  first 
check  was  paid  it  was  justified  in  cashing  the 
successive  checks.  Vol.  6,  p.  206,  Sept., 
1913. 

528.  (S.  Dak.)  A  statute  in  South  Dakota 
relieves  a  bank  from  liability  to  depositor  for 
payment  of  a  forged  check  unless  the  deposi- 
tor notifies  the  bank  of  the  forgery  within 
three  months  after  return  to  him  of  forged 
check  as  voucher.     Vol.  6,  p.  437,  Dec,  1913. 

Forged  order  on  savings  deposit 

529.  (Kan.)  A  forged  check  and  a  pass- 
book were  presented  at  a  bank  by  a  man  who 
had  been  in  the  habit  of  making  deposits  for 
the  customer  of  the  bank  owning  the  savings 
deposit.  The  signature  of  the  forged  check 
seemed  identical  with  the  genuine  signature. 
Opinion:  The  bank  is  protected  where  the 
person  receiving  payment  presents  the  pass- 
book and  reasonable  care  is  exercised  by  the 
bank  in  making  the  pavment.  Vol.  3,  p.  521, 
March,  1911. 

530.  (Kan.)  Where  payment  is  made  by 
a  savings  bank  on  a  forged  order  to  one  pre- 
senting the  depositor's  pass-book,  and  the  rule 
of  the  bank  is  that  payment  to  one  presenting 
the  pass-book  is  valid,  the  bank  is  protected 
if  reasonable  care  is  used  ;  otherwise  not.  Vol. 
2,  p.  373,  March,  1910. 

531.  (Ky.)  A  man  not  purporting  to  be 
a  depositor  on  presentment  of  a  pass-book 
and  a  forged  order  received  payment  from  a 
savings  bank.  One  of  the  by-laws  of  the  bank 
sul)scribed  to  by  the  depositor  road  that  "a 
payment  on  presentment  of  a  pass-book  shall 
1)0  a  discharge  to  the  bank  for  the  amount  so 
paid."  Opinion:  The  by-law  protected  the 
i)ank  where  reasonable  care  was  used.  In  the 
absence  of  suspicious  eircumst-ances.  where  the 
bank  compared  the  signatures  and  found 
them  similar,  a  court  would  likely  hold  that 


67 


532 


DIGEST  OF  LEGAL  OriNIONS 


it  used  reasonable  care.     Vol.  5,  p.  305,  Nov., 
1912. 

532.  (Ohio.)  The  printed  regulations 
in  a  savings  pass-book  are  binding  upon  the 
depositor,  but  tlicy  do  not  absolutely  relieve 
the  bank  from  responsibility  in  ease  of  pay- 
ment to  a  wrong  person  who  presents  the 
book  with  a  forged  order,  because  the  courts 
add  thereto  the  implied  condition  that  the 
bank  in  making  such  payment  must  have 
exercised  reasonable  care.  Vol.  6,  p.  761, 
May,  1914. 

533.  (Tex.)  Where  a  bank  exercises  due 
care,  it  is  not  responsible  when  it  pays  a 
savings  deposit  to  the  wrong  person  on  pre- 
sentation of  the  pass-book  with  a  forged 
order.     Vol.  5,  p.  22,  July,  1912. 

Non-recovery  of  money  paid  on  forged 
check 

534.  (111.)  D,  who  was  employed  by  B, 
made  out  a  check  to  himself,  forging  B's 
name.  L,  who  received  the  check  in  pay- 
ment for  goods,  deposited  it  two  days  later 
at  the  drawee  bank  and  received  credit  there- 
for. Opinion:  By  the  greater  weight  of  au- 
thority under  the  Negotiable  Instruments 
Law,  there  can  be  no  recovery  from  L  in 
such  a  case  where  the  drawee  mistakes  the 
drawer's  signature  and  pays  a  forged  check 
to  a  bona  fide  holder  not  guilty  of  negligence. 
Vol.  5,  p.  447,  Jan.,  1913. 

535.  (Kan.)  A  bank'  paid  a  check 
upon  which  the  drawer's  signature  was  forged 
and  which  was  presented  by  a  merchant  who 
had  taken  the  check  from  another  persoQ. 
Opinion:  The  bank  can  neither  charge  the 
amount  to  the  drawer  nor  recover  from  the 
bona  fide  holder  who  received  payment.  Vol. 
8,  p.  911,  April,  1916. 

536.  (Mo.)  Under  the  law  of  Missouri 
a  bank  cashing  a  check  upon  which  the 
drawer's  signature  is  forged,  is  not  liable  to 
refund  the  money  to  the  drawee  which  has 
paid  the  check.     Vol.  3,  p.  676,  May,  1911. 

537.  (Mont.)  Bank  A  paid  its  custom- 
er's check  after  presentation  by  Bank  B  which 
had  cashed  it  for  one  of  its  customers.  Later 
the  drawee  discovering  that  it  bore  a  forgery 
of  the  drawer's  signature,  returned  the  clieck 
to  the  first  indorser,  who  was  the  customer 
of  Bank  B,  ,  and  received  cash  for  same,  but 
during  tlie  same  day  the  customer  presented 
the  same  check  to  Bank  A  and  received  pay- 
ment. Bank  A  then  claimed  the  right  to  re- 
turn the  check  to  Bank  B  and  recover  the 


money.  Opinion:  Bank  A,  mistaking  the 
signature  of  its  customer  and  paying  money 
upon  a  forged  check,  eannot  recover  same 
from  Bank  B,  the  innocent  holder,  who  re- 
ceived payment,  and  the  fact  that  a  prior 
indorser,  after  discovery  of  the  forgery,  re- 
turned the  money  to  the  drawee,  but  after- 
wards demanded  and  received  the  same  back 
again,  does  not  alter  the  case.  Vol.  11,  p. 
480,  March,  1919. 

538.  (Okla.)  According  to  the  law  of 
Oklahoma,  the  drawee  paying  a  forged  check 
cannot  in  the  absence  of  negligence  or  fraud 
recover  the  amount  from  a  bona  fide  holder 
receiving  payment.  Vol.  5,  p.  307,  Nov., 
1912. 

539.  (Ore.)  Where  the  drawee  pays  a 
check  bearing  the  forged  signature  of  the 
drawer  to  a  holder  who  has  received  the  same 
in  due  course,  without  fraud  or  negligence,  it 
cannot  afterwards  recover  the  monev  paid. 
Vol.  6,  p.  437,  Dec,  1913  . 

540.  (S.  Dak.)  It  is  the  general  rule 
that  the  drawee  is  bound  by  the  pa)Taent  of 
a  forged  check  and  cannot  recover  money  paid 
to  a  bona  fide  holder.  There  are  exceptions 
in  some  States.  The  question  has  not  yet 
been  passed  upon  in  South  Dakota.  Vol.  8, 
p.  705,  Feb.,  1916. 

541.  (Tex.)  A  check  drawn  on  a  Texas 
bank  was  deposited  for  collection.  After  it 
was  paid  and  the  amount  paid  out  by  the 
collecting  bank,  forgery  of  the  drawer's  sig- 
nature was  discovered.  Which  bank  stands 
the  loss?  Opinion:  Drawee  bank  which  pays 
check  upon  which  drawer's  signature  is 
forged  to  a  bank  receiving  same  in  good  faith, 
and  paying  out  the  money  before  notice  of  the 
forger}'',  cannot  recover  the  money  back.  Vol. 
11,  p.  96,  Aug.,  1918. 

542.  (Tex.)  A  draft  was  forged  by  the 
payee,  indorsed  by  him  and  by  his  brother, 
cashed  by  a  bank  on  faith  of  the  brother's 
signature,  and  paid  by  the  drawee.  Opinion: 
The  drawee  must  stand  the  loss  where  it  can 
be  shown  that  the  bank  was  a  bona  fide  holder 
and  that  the  forger's  brother  was  not  a  guilty 
participant.     Vol.  1,  p.  334,  March,  1909. 

543.  (Wash.)  A  check  upon  which  the 
drawer's  signature  is  forged  is  deposited  in 
bonk  by  a  customer  and  paid  by  the  drawee 
through  the  Clearing  House.  Three  days 
later  the  forgery  is  discovered  and  re-pay- 
ment demanded.  Opinion:  The  Supreme 
Court  of  Washington  held  in  1902  that  a 
drawee  which  paid  a  forged  check  to  another 
bank,  which  had  negligently  cashed  the  check 


68 


FORGERY 


550 


upon  the  payee's  indorsement,  without  in- 
quiry or  identification,  could  recover  if  it 
acted  within  a  reasonable  time ;  and  also  per- 
mitted recovery  where  the  recipient  would 
not  be  prejudiced  by  the  repayment.  Xo 
reference  in  this  case  Avas  made  to  the  Ne- 
gotiable Instruments  Law  M'hich  had  been  in 
force  in  1899,  but  since  that  decision  the 
courts  in  New  York,  Missouri,  Oregon  and 
Oklahoma  have  held  the  drawee  is  bound  and 
precluded  from  recovering  money  paid  on  a 
forged  check  to  a  bona  fide  holder  not  guilty 
of  negligence.  The  right  of  recovery  in  the 
present  case  would  be  denied  if  the  Washing- 
ton court  should  place  a  similar  construction 
upon  the  Negotiable  Instruments  Act.  Vol. 
5,  p.  308,  Nov.,  1912. 

544.  (W.  Va.)  Drawee  which  pays  a 
check  upon  which  the  drawer^s  signature  has 
been  forged,  to  a  bona  fide  holder  free  from 
negligence,  has  no  right  of  recovery  from 
such  holder  of  the  money  paid.  Vol.  10,  p. 
595,  Feb.,  1918. 

545.  (Iowa.)  A  bank  paid  three  checks 
aggregating  $35,  upon  which  the  drawer's  sig- 
nature was  forged.  The  checks  were  in- 
dorsed by  three  different  indorsers  and  came 
to  the  drawee  bank  through  the  clearings. 
The  bank  seeks  to  recover  from  the  indorsers, 
if  possible.  Opinion:  The  general  rule  sup- 
ported by  numerous  authorities  is  tliat  the 
drawee,  which  pays  a  forged  check  to  a  bona 
fide  holder  cannot  recover  the  money  back. 
The  indorsement  does  not  warrant  the  gen- 
uineness of  the  drawer's  signature.  But  in 
Iowa,  if  the  first  holder  is  negligent  recovery 
may  be  had  of  him,  but  such  negligence  can- 
not be  imputed  to  subsequent  holder  so  as  to 
make  him.  liable.  Vol.  10,  p.  C59,  March, 
1918. 

546.  (Neb.)  On  June  2nd,  Ur.  A.  gave 
his  emplo3ee,  R.  W.,  a  check  for  $11.25,  and 
the  latter  made  a  copy,  forging  the  name  of 
Mr,  A.  on  tlie  copied  check.  The  forged 
check  was  cashed  and  later  deposited  at  the 
B  bank,  who  in  turn  presented  the  check  to 
the  drawee  bank  and  received  the  money. 
Several  months  later  v/hen  Mr.  A.  received 
his  checks,  he  discovered  the  forged  check 
and  called  upon  the  drawee  bank  for  the 
amount.  Opinion:  Under  the  law  of  Ne- 
braska the  drawee  who  pays  a  check  upon 
which  the  drawer's  signature  has  been  forged 
cannot  recover  back  the  money  imless  he 
pleads  and  proves  that  the  lioldcr  was  negli- 
gent in  purcliasing  or  indorsing  the  instru- 
ment, or  guilty  of  bad  faith.  Vol.  9,  p.  981, 
June,  1917. 


547.  (Tenn.)  A  retailer  accepted  checks, 
upon  which  drawer's  signature  was  forged,  in 
payment  of  merchandise,  indorsed  and  trans- 
ferred them  to  a  wholesaler  and  the  latter 
deposited  them  in  a  bank  which  collected 
them  from  the  drawee.  The  drawer's  pass- 
book was  not  balanced  for  eight  or  ten 
months,  at  which  time  the  forgery  was  dis- 
covered and  notice  thereof  given.  The 
drawee  seeks  to  recover  the  amount  paid. 
Opinion:  The  drawee  bank  has  no  right  of 
recovery,  under  the  decisions  in  Tennessee, 
from  the  bank  receiving  payment  and  prob- 
ably under  such  decisions  would  be  denied 
recovery  from  the  retailer,  even  tliough  the 
latter  was  guilty  of  first  negligence  in  accept- 
ing the  checks  without  proper  identification. 
Vol.  10,  p.  717,  April,  1918. 

Recovery  of  money  paid  on  forged  check 

548.  (111.)  It  is  the  general  rule  that 
the  drawee  bank  having  paid  a  check  bearing 
a  forgery  of  the  drawer's  signature  cannot  re- 
cover the  money  from  a  person  wlio  has  re- 
ceived payment  of  the  same  in  good  faith. 
Whether  the  fact  that  the  holder  would  not 
be  prejudiced  if  compelled  to  refund  consti- 
tutes an  exception  to  the  general  rule  is  un- 
certain in  Illinois.  It  was  held  in  an  Illi- 
nois case  where  tlie  holder  before  receiving 
payment  on  a  forged  check  had  knowledge  of 
suspicious  fact^i,  which  was  not  imparted  to 
the  drawee  and  would  be  in  no  worse  posi- 
tion if  compelled  to  refund,  that  an  exception 
to  the  rule  existed  and  the  drawee  could  re- 
cover, but  in  that  case  the  holder  was  deprived 
of  a  status  of  good  faith  holder.  Most 
courts  hold  that  the  single  fact  that  the  holder 
would  not  be  prejudiced  if  compelled  to 
refund,  is  not  of  itself  suificient  to  create  an 
exception  to  the  general  rule  denying  the 
drawee  the  right  of  recovery  from  a  bona  fide 
holder.  Further,  a  drawee  cannot  recover 
from  a  bona  fide  holder  who  has  received 
jiayment  of  check  drawn  by  a  person  having 
no  account  in  the  bank.  Vol.  10,  p.  852, 
June,  1918. 

549.  (Miss.)  The  drawee  of  a  check 
on  which  the  drawer's  signature  is  forged 
can  recover  from  jiayoc  the  money  i)aid  there- 
on. The  payee  should  know  with  whom  he 
is  dealing,  and  if  the  check  is  a  forgery  he  is 
liable  to  the  drawee.  Vol.  5,  j).  7. "jo.  May, 
1913. 

550.  (Iowa.)  A  customer  deposited  for 
collection  a  check  drawn  on  a  local  bank 
which  was  duly  paid  through  the  clearings. 
Thirty  days  later  the  drawee  bank  discovered 


69 


551 


DIGEST  OF  LEGAL  OPINIONS 


that  the  drawer's  signature  liad  been  forged 
and  seeks  to  hold  the  collecting  bank  liable  as 
indorser.  Opinion:  In  Iowa  a  drawee  which 
pays  to  a  bona  fide  holder  a  check  upon  which 
the  drawer's  signature  is  forged  cannot  re- 
cover the  money,  but  if  the  holder  has  been 
negligent  in  acquiring  the  check  without  due 
inquiry,  recovery  is  allowed.  Where  payment 
is  made  to  a  bona  fide  indorsee  of  a  negligent 
holder,  the  latter  is  not  liable  but  the  drawee 
has  recourse  upon  the  prior  indorser  who  is 
guilty  of  negligence.  Vol.  10,  p.  464,  Dec, 
1917. 

551.  (Term.)  A  customer  cashed  a 
forged  check  at  his  bank,  which  in  turn  re- 
ceived payment  from  the  drawee  bank.  A 
month  later  the  drawee  discovered  the  forgery 
of  its  depositor's  signature.  Opmion:  Re- 
covery of  payment  by  the  drawee,  under  the 
law  of  Tennessee,  depends  on  whether  or  not 
the  customer  was  negligent  in  taking  the 
check  from  the  forger.  Vol.  2,  p.  303,  Jan., 
1910. 

552.  (Pa.)  On  August  19th  a  check 
bearing  the  forged  signature  of  the  drawer 
was  deposited  by  a  merchant,  a  bona  fiHe 
holder,  and  was  paid  by  the  drawee.  On  Oc- 
tober 11th  the  forgery  was  discovered  and  the 
drawee  notified.  Opinion:  In  Pennsylvania 
the  drawee  can  recover  from  the  holder  re- 
ceiving payment  under  the  Act  of  1849,  pro- 
vided prompt  notice  of  the  forgery  is  given. 
The  question  of  what  is  prompt  notice  is 
somewhat  uncertain  under  the  Pennsylvania 
decisions.  Delay  in  giving  notice  will  relieve 
the  person  receiving  payment  from  liability 
unless  he  is  not  prejudiced  by  such  delay. 
Vol.  8,  p.  417,  Nov.,  1915. 

553.  (Neb.)  Where  the  drawee  paid  a 
forged  check,  it  can  under  the  law  of  Ne- 
braska recover  the  money  paid  from  the  party 
who  cashed  the  same,  but  who  failed  to  re- 
quire proof  of  the  identity  of  the  person  pre- 
senting the  check.  Vol.  1,  p.  168.  Nov., 
1908. 

554.  (Pa.)  A  cheek  bearing  the  ficti- 
tious name  of  a  payee  was  cashed  by  a  bank 
for  the  payee  and  paid  by  the  drawee.  One 
mouth  later  the  drawee  discovered  the  forgery 
of  the  drawer's  signature.  Upon  whom 
should  the  loss  fall?  Opinion:  In  Pennsyl- 
vania, under  the  Act  of  1849,  a  bank  which 
pays  money  upon  a  forged  check,  purporting 
to  be  drawn  upon  it,  is  not  precluded  from 
recovering  the  money  paid,  provided  it  gives 
notice  with  reasonable  diligence.  WHiat  is 
reasonable  diligence  and  whether  a  delay  of 


thirty  days  between  payment  and  notification, 
notice  being  given  immediately  upon  dis- 
covery would  be  unreasonable,  is  not  clearly 
defined  by  Pennsylvania  decisions.  Vol.  11, 
p.  556,  April,  1919. 

555.  (Pa.)  A  bank  paid  a  forged  check 
upon  which  the  signatures  of  the  drawer  and 
payee  were  the  same.  Two  months  later  the 
forgery  was  discovered.  The  bank  receiving 
payment  guaranteed  prior  indorsements. 
Opinion:  The  drawee  bank  would  have  a  fair 
chance  of  recovery  from  the  bank  receiving 
payment.  The  Act  of  1849,  still  in  force  in 
Pennsylvania,  favors  the  drawee's  recovery. 
Furthermore,  the  courts  may  hold  that  the 
bank  receiving  payment  has  by  its  indorse- 
ment specially  guaranteed  the  genuineness  of 
the  drawer's  signature,  he  being  also  indors- 
ing payee.     Vol.  5,  p.  242,  Oct.,  1912. 

556.  (S.  Dak.)  A  bank  in  South  Dakota 
paid  a  check  drawn  on  it  for  $8.50,  bearing 
a  forgery  of  the  drawer's  signature,  said 
check  having  been  indorsed  and  presented 
by  another  bank  to  whom  the  amount  was 
paid.  A  month  later,  when  the  depositor 
had  his  bank  book  balanced,  the  forgery  was 
discovered,  and  the  presenting  bank  imme- 
diately notified.  The  holder  of  the  check  dis- 
claims responsibility.  Opinion:  The  general 
rule  is  that  drawee  cannot  recover  money 
paid  on  forged  check  to  bona  fide  holder  who 
is  free  from  negligence.  In  South  Dakota 
exceptional  rule  exists  that  money  is  recover- 
able on  theory  that  drawee  has  right  to  rely 
on' holder's  indorsement  as  vouching  for  gen- 
uineness of  signature.  Vol.  10,  p.  203,  Sept., 
1917. 

Checks  cashed  for  strangers 

See    355 

557.  (111.)  A  drawee  bank  paid  six 
forged  checks  to  banks  which  cashed  them  for 
strangers  without  identification.  Opinion: 
The  drawee  cannot  charge  them  to  drawer's 
account,  but  would  probably  have  a  right  of 
recovery  against  the  banks  under  the  Illinois 
decisions,  unless  the  Negotiable  Instruments 
Law  is  construed  as  precluding  recovery.  Vol. 
6,  p.  271,  Oct.,  1913. 

558.  (Okla.)  In  Oklahoma,  drawe  who 
pays  forged  check  to  a  bona  fide  holder  free 
from  negligence  cannot  recover  money  paid. 
Since  the  passage  of  the  Negotiable  Instru- 
ments Act  in  1912  the  question  is  an  open 
one  in  the  state,  whether  holder  taking  check 
from  stranger  without  inquiry  as  to  identity 


FORGERY 


564 


is  negligent  and  responsible  to  the  drawee. 
Vol.  9,  p.  654,  Feb.,  1917. 

559.  (Okla.)  A  check  upon  which  the 
drawer's  signature  was  forged  was  cashed  by 
a  bank  in  Oklahoma,  which  took  it  from  a 
stranger  without  identification.  Relying 
upon  the  express  guarantee  of  the  bank  that 
the  payee's  indorsement  was  genuine,  the 
drawee  paid  the  check.  Opinion :  The  drawee 
can  recover  the  money.  Vol.  3,  p.  589,  April, 
1911. 

560.  (Minn.)  A  drawee  bank  paid  two 
checks  upon  which  the  drawer's  signature  was 
forged.  The  checks  had  been  cashed  at  sa- 
loons in  the  town  and  the  saloonkeepers  were 
unable  to  identify  the  indorsements.  The 
bank  admits  its  liability  to  the  drawer  but 
seeks  to  hold  the  indorsers  responsible  for 
cashing  the  checks  for  strangers.  Opinion: 
Drawee  cannot  recover  money  paid  upon 
check  bearing  forgery  of  drawer's  signature 
from  bona  fide  holder,  but  may  recover  when 
payment  is  made  to  one  not  a  bona  fide  holder. 
If  the  holder  takes  the  check  under  circum- 
stances which  would  put  an  ordinarily  pru- 
dent man  upon  inquiry  and  makes  no  attempt 
to  ascertain  the  truth,  he  is  not  a  bona  fide 
holder,  but  in  Minnesota  the  one  circumstance 
that  holder  takes  check  from  an  entire  stran- 
ger without  inquiry  is  not  sufficient  to 
deprive  him  of  status  of  bona  fide  holder. 
If  payee's  indorsement  is  also  forged,  the 
drawee,  under  Minnesota  rule,  may  recover 
from  subsequent  indorser  as  warrantor  of 
genuineness,  notwithstanding  forgery  of 
drawer's  signature.  Vol.  10,  p.  202,  Sept., 
1917. 

Forgery  of  signature  by  mark 

561.  (Cal.)  A  customer  left  his  written 
signature  at  a  bank  and  two  years  later  his 
check  was  presented  signed  by  a  mark  with 
two  witnesses  unknown  to  the  bank.  The 
check  had  been  cashed  by  another  bank  which 
refused  to  guarantee  the  signature.  Opin- 
ion: The  drawee  before  paying  the  check  is 
entitled  to  require  a  guaranty  or  satisfactory 
evidence  of  the  genuineness  of  the  signature. 
In  the  event  the  drawee  should  pay  the  check 
and  it  should  prove  to  be  a  forgery,  the  rule 
that  a  bank  is  bound  to  know  its  customer's 
signature  and  cannot  recover  money  paid  a 
bona  fide  holder  on  a  forgery  thereof,  has 
never  been  applied  where  the  check  was 
signed  by  mark  with  witnesses,  and  in  such 
case  the  bank  receiving  payment  is  equally 
bounil  with  the  drawee  to  know  the  genuine- 


ness of  the  signature  and  the  credibility  of 
the  witnesses.     Vol.  5,  p.  833,  June,  1913. 

562.  (Ga.)  Sam  Smith  has  an  account 
with  a  bank,  and  being  unable  to  write,  signs 
checks  with  a  mark,  having  someone  to  wit- 
ness the  same.  Henry  Jones,  representing 
himself  to  a  merchant  as  Sam  Smith,  fills  out 
a  check  on  the  bank  to  his  own  order,  which 
bears  the  forged  signature 

his 
"Sam   X  Smith" 
mark 
and  the  signature  of  the  merchant  as  a  wit- 
ness.    The  bank  paid  Henry  Jones  the  cash 
on  tliis  check,  and  seeks  to  hold  the  merchant 
liable.     Opinion:  When   a   person   signs  his 
name  as  witness  to  a  signature  Viy  mark  upon 
a  check,  which  signature  is  a  forgery,  the  wit- 
ness is  liable  to  the  drawee  bank  which  pays 
the  check  in  reliance  upon  such  signature  as 
witness.     Vol.  10,  p.  780,  May,  1918. 

563.  (Wis.)  Bank  A  issued  a  time  cer- 
tificate of  deposit  to  Mr.  and  Mrs.  John  Doe, 
who  are  illiterate  and  give  their  signature  by 
mark.  Dick  Smith  having  forged  the  sig- 
natures of  the  payees  by  mark  deposited  the 
certificate  in  Bank  C,  which  in  turn  for- 
warded it  to  Bank  B  and  received  a  ri'init- 
tance,  although  before  maturity.  Bank  B 
held  the  instrument  for  three  months  until 
the  date  of  maturity  and  upon  presentment 
the  amount  was  paid  by  Bank  A.  The  payees 
claimed  that  their  purported  indorsement  was 
forged  and  sue  Bank  A  for  payment.  Ojnn- 
ion:  A  bank  wliich  pays  a  certificate  of  de- 
posit upon  forgery  of  the  payee's  signature, 
made  by  mark  and  witness,  remains  liable  to 
the  payee  for  the  money  but  has  right  of  re- 
covery from  the  bank  which  collected  tlio  cer- 
tificate upon  forged  indorsement.  Bank  C, 
therefore,  must  bear  the  loss.  The  rule 
v.'hich  has  been  held  in  one  or  two  cases  that 
a  bank  is  bound  to  know  the  payee's  indor.<e- 
ment  upon  its  certificate  of  deposit  has  no  ap- 
plication where  the  indorsement  is  bv  mark 
and  witness.  The  fact  tliat  Bank  B  remitted 
to  Bank  C  before  maturity  of  the  certificate 
and  held  the  same  until  maturity  before  col- 
lecting from  Bank  A  would  have  no  bearing 
on  the  question  of  liabilitv.  Vol.  11,  p.  40, 
July,  1918.     See  280,  512,  515. 

Forged  telegraph  order  to  pay  money 

564.  (Ark.)  A  bank  received  a  tele- 
grapli  message  purporting  to  be  signed  by  an- 
other bank.  "Pay  John  Jones  $75,  waive  iden- 
tification, we  remit."     The  message  was  not 


71 


565 


DIGEST  OF  LEGAL  OPINIONS 


sent  by  any  bank  but  by  a  person  unknown  to 
the  telcf^jruph  company,  Avhicli  cannot  find  out 
the  identity  of  the  sender.  Tlic  bank  })aid 
the  money  on  failh  of  the  tele<^frani.  Opin- 
ion: Where  a  telc^ra])h  company  receives  and 
transmits  a  forged  telegram  purporting  to  be 
sent  by  one  bank  to  anotlier,  ordering  the 
payment  of  money,  the  company  is  not  liable 
as  an  insurer  of  the  genuineness  of  the  mes- 
sage, but  is  bound  to  exercise  reasonable  care 
to  receive  and  transmit  only  genuine  mes- 
sages and  is  responsible  for  negligence  in  that 
regard.  Where  a  telegraph  company  re- 
ceives from  a  person  a  message  signed  in  the 
name  of  a  bank,  without  making  inquiry  of 
the  bank  or  ascertaining  the  authority  of  the 
sender  to  sign  the  bank's  name,  it  does  not 
use  due  care  and  is  responsible.  Vol.  4,  p. 
686,  May,  1912. 

565.  (Cal.)  A  telegraph  company  wir- 
ing a  forged  message  purporting  to  be  from 
one  bank  to  another,  requesting  the  payment 
of  money  to  a  person  named,  without  identi- 
fication, is  not  an  insurer  of  the  genuineness 
of  the  message,  but  is  bound  to  exercise  rea- 
sonable care  and  is  responsible  for  negligence. 
The  use  of  the  American  Bankers  Associa- 
tion cipher  code  affords  increased  protection. 
Vol.  7,  p.  163,  Sept.,  1914. 

566.  (N.  M.)  A  bank  received  from  the 
delivery  boy  of  a  telegraph  company  a  mes- 
sage purporting  to  be  signed  by  another  bank 
requesting  it  to  pay  L.  $600.  The  money  was 
paid  L.,  who  disappeared.  Later  in  the  day 
the  telegraph  company  informed  the  bank 
that  the  message  was  forged.  Opinion:  The 
telegraph  company  is  liable  to  the  bank. 
While  the  telegraph  company  is  not  a  war- 
rantor of  the  truth  of  messages,  it  is  bound 
to  exercise  due  care  in  ascertaining  the  au- 
thenticity of  a  received  message,  and  its  act 
of  delivery  is  a  representation  that  the  mes- 
sage was  received  from  the  bank  whose  sig- 
nature is  affixed.     Vol.  3,  p.  735,  June,  1911. 

Recovery  of  money  paid  on  forged 
indorsement 

567.  (Okla.)  Where  a  check  on  which 
the  payee's  indorsement  is  forged  is  cashed 
by  a  merchant,  is  deposited  in  a  bank  and  col- 
lected of  the  drawee,  the  latter  cannot  charge 
payment  to  the  drawer,  but  has  the  right  of 
recovery  from  the  bank  receiving  payment 
which  in  turn  has  recourse  upon  the  mer- 
chant. The  elapsing  of  several  days  before 
discoverv  of  the  forgerv  would  not  affect  the 


was 


right  of  recovery  where  prompt  notice 
given.     Vol.  6,  p.  271,  Oct.,  1913. 

568.  (Pa.)  A  check  payable  to  a,  firm 
whose  indorsement  was  forged  was  paid  to  an 
express  company  by  a  bank  after  it  had  tele- 
phoned the  maker.  Opinion:  The  bank  can- 
not cliarge  the  amount  to  the  drawer's  account 
unless  tlie  latter  was  negligent  in  giving  no- 
tice after  the  discovery  of  the  forgery.  The 
bank  has  a  right  of  recovery  against  the  ex- 
press compaTiy,  provided  the  indorsement  to 
the  latter  was  in  unrestricted  form.  Vol.  9, 
p.  414,  Nov.,  1916. 

569.  (Pa.)  A  bank  which  cashes  for 
the  second  indorser,  who  is  its  customer,  a 
check  upon  which  the  payee's  indorsement  is 
forged,  has  the  right  to  charge  the  amount  to 
the  customer's  account.  Vol.  2,  p.  155,  Oct., 
1909. 

570.  (Idaho.)  Bank  A,  in  excliange  for 
$150  currency  and  a  forged  check  for  $75.50, 
issued  to  a  forger  its  cashier's  check  payable 
to  a  different  person  for  $225.50.  The 
forger  indorsed  the  payee's  name  and  forged 
the  indorsement  of  another  person  as  identi- 
fier and  succeeded  in  cashing  the  check  at 
Bank  B  in  a  neighboring  town,  to  which 
Bank  A  paid  the  full  amount.  Bank  A  de- 
manded that  Bank  B  refund  the  amount. 
Opinion:  Bank  A  cannot  recover  the  $150 
for  which  it  received  full  value.  As  to  the 
$75.50,  it  can  recover  the  amount  on  the 
ground  that  Bank  B  took  the  check  under  a 
forged  indorsement  and  acquired  no  title. 
Although  the  check  was  payable  to  a  name 
supplied  by  the  forger,  it  cannot  be  regarded 
as  payable  to  bearer  under  the  Negotiable  In- 
struments Act,  as  the  drawer  was  without 
knowledge  that  the  payee  was  fictitious.  Nor 
can  the  indorsement  be  regarded  as  made  by 
the  precise  person  intended  to  receive  the 
money  and  therefore  not  a  forgery,  because 
the  bank  did  not  intend  to  make  it  payable 
to  the  person  who  received  the  check  but  to 
a  different  person  whose  name  was  supplied 
by  the  forger.     Vol.  9,  p.  579,  Jan.,  1917. 

571.  (Kan.)  A  bank  paid  its  own 
cashier's  check,  upon  which  the  payee's  in- 
dorsement was  forged.  The  check  was  pre- 
sented bearing  the  previous  indorser's  stamp 
guaranteeing  prior  indorsements.  Opijiion: 
The  bank  may  recover  the  money  paid.  It 
is  not  bound  to  know  the  signature  of  the 
payee  which  is  not  kept  on  file.  Vol.  8,  p. 
1015,  May,  1916. 

572.  (Tenn.)  A  bank  which  cashes  a 
check  bearing  the  forgery  of  the  payee's  in- 


72 


FORGERY 


578 


dorsement  acquires  no  title,  aud  where  it  re- 
ceives payment  from  the  drawee  must  refund. 
Vol.  6,  p.  33,  July,  1913. 

573.  (Wyo.)  A  forger  impersonating 
A  deposited  for  collection  a  draft  payable  to 
A.  To  make  sure  that  the  payee's  indorse- 
ment was  genuine,  the  bank  holding  the  draft 
sent  a  sample  of  the  supposed  A's  signature 
to  the  drawer  (with  whom  A  formerly  had 
an  account)  for  verification.  The  drawer 
having  compared  the  genuine  and  the  forged 
signatures  of  A,  returned  the  signature  sent 
on  for  verification,  also  a  sample  signature  of 
their  customer,  to  the  bank,  with  the  state- 
ment that  in  its  judgment  the  two  signatures 
agreed.  Opinion:  The  bank  cashing  the 
draft  on  the  forgery  and  collecting  from  the 
drawee  is  obliged  to  refund.  The  drawer  by 
its  statement  is  not  estopped  from  denying 
the  genuineness  of  the  payee'  signature.  Vol. 
4,  p.  94,  Aug.,  1911. 

574.  (Wash.)  John  Doe  gives  his  check 
to  Richard  Roc.  It  was  indorsed  as  follows : 
"Richard  Roe,  by  S.  E.  T.",  "Pay  to  the  order 
of  any  bank,  banker  or  trust  company 
Bank  of  Smallville,  Washington,"  "Pay  to 
any  bank,  banker  or  trust  company.  Bank 
of  Oregon,  Portland,  Oregon,"  and  mailed 
by  the  latter  to  the  drawee  for  col- 
lection and  credit.  It  developed  later  that 
"S.  E.  T."  had  no  authority  to  indorse.  On 
whom  does  the  loss  fall?  Opinion:  The 
drawee  paying  the  check  upon  which  the 
payee's  indorsement  was  unauthorized  may 
recover  the  money  from  the  party  receiving 
payment,  unless  there  was  unreasonable  delay 
in  giving  notice  after  discovery  of  the  forged 
or  unauthorized  indorsement.  There  is  con- 
flict of  authority  whether  indorsement  "pay 
any  bank  or  banker"  is  general  or  restrictive. 
There  is  a  line  of  cases  to  the  effect  that  said 
form  of  indorsement  is  not  title-conveying 
but  restrictive  and  agent-creating,  and  does 
not  of  itself  guaranty  prior  indorsements. 
The  courts  in  Massachusetts,  Georgia  and 
l^Iissouri  hold  this  view.  A  Nebraska  case 
held  such  form  of  indorsement  not  a  restric- 
tive but  a  general  indorsement,  or  title-con- 
veying form,  and  this  rule  is  supported  by  the 
better  reason.  Under  either  rule,  the  IBank 
of  Smallville  is  the  ultimate  loser,  provided  it 
received  prompt  notice  of  the  error.  Vol.  10, 
p.  121,  Aug.,  1917.  See  521,  522,  552,  581, 
583,  584. 

Effect  of  delay  in  giving  notice  of  forgery 

575.     (Mass.)     A  bank  received  for  col- 
lection several  checks  from  C,  its  depositor, 


who  was  acting  as  collector  of  B,  a  French 
Fund  for  Orphans,  which  was  named  as  payee 
and  to  whom  the  checks  were  donated.  The 
checks  bore  the  indorsements  of  the  payee 
and  of  C,  and  were  paid  by  the  drawee  bank. 
After  two  years  liad  elapsed,  B  claims  that  his 
indorsement  was  a  forgery  and  demands  res- 
titution. Opinion:  Where  tiie  payee's  in- 
dorsement on  certain  checks  is  forged  and  the 
forger  deposits  the  checks  in  a  bank  which 
collects  them  from  the  drawee,  the  payee  has 
a  right  of  action  against  the  indorsee  bank  for 
the  proceeds  of  such  checks  and  a  delay  of  two 
years  before  giving  notice  will  not  affect  iiis 
right  of  recovery  unless  the  indorsee  bank 
has  been  prejudiced  by  such  delay  or  suffered 
a  loss,  which  an  earlier  notice  might  have  pre- 
vented.    Vol.  11,  p.  488,  March,  1919. 

576.  (Miss.)  A  drawee  bank  paid  a 
draft,  upon  which  the  payee's  indorsement 
was  forged,  and  eiglit  months  later  discovered 
the  forgery.  Three  and  one-half  mouths 
after  said  discovery-  the  drawee  notified  the 
bank  which  cashed  the  draft  and  demanded 
a  return  of  the  money.  Opinion:  According 
to  the  rule  adopted  in  a  number  of  States,  the 
drawee's  delay  in  giving  notice  after  discov- 
ery bars  its  recovery,  provided  the  bank  re- 
ceiving payment  was  damaged  by  such  delay ; 
but  under  the  theory  of  the  United  States 
Supreme  Court,  the  drawee  can  recover  upon 
breach  of  warranty,  irrespective  of  the  un- 
reasonable delay  in  giving  notice.  The  right 
of  recovery  would,  therefore,  seem  to  depend 
upon  the  jurisdiction  in  which  the  action  i.s 
brought.     Vol.  6,  p.  512,  Jan.,  1914. 

Recovery  where  indorsement  guaranteed 

577.  (Fla.)  A  check  on  A  bank,  payable 
to  and  indorsed  in  blank  by  D,  followed  by 
indorsement  of  R,  to  order  of  Bank  of  B,  and 
indorsed  by  latter  "previous  iiulorsements 
guaranteed,"  was  ])aid  to  li  bank.  Drawer 
pronounces  check  a  forgery.  Opinion:  The 
drawee  cannot  hold  B  bank.  Money  paid 
upon  forged  cliock  cannot  be  recovered  frora 
a  bona  fide  holder  who  received  payment. 
The  guaranty  of  prior  indorsements  does  not 
warrant  genuineness  of  drawer's  signature. 
Vol.  3,  p.  734,  June,  1911. 

578.  (Ky.)  Whore  C  bank  draws  its 
draft  on  G  bank  in  favor  of  D.  F.  Co.,  and 
the  indorsement  of  the  payee  is  forged  and 
the  draft  deposited  in  II  bank,  which  guaran- 
tees the  indorsement  and  collects  Troni  the 
drawee  through  I  bank,  C  bank  on  learning 
of  the  forgery  six  months  later  has  the  right 
of  recover}'  against  drawee  G,  which  in  turn 


73 


579 


DIGEST  OF  LEGAL  OPINIONS 


has  a  remedy  against  I  and  H  banks,  the 
latter  being  the  ultimate  loser.  Vol.  1,  p.  94, 
Sept.,  1908. 

579.  (Okla.)  A  bank  as  drawee  received 
a  check  of  $15,000,  payable  to  James  Smith. 
It  was  indorsed  "James  Smith,  by  Florence 
Smith"  and  had  the  regular  stamp  indorse- 
ments of  several  banks,  reciting  "all  previous 
indorsements  goiarajnteed."  Would  draWee 
be  protected  in  paying  check  in  event  James 
Smith  claimed  he  never  received  the  money? 
Opinion:  Where  the  payee's  indorsement  is 
forged  and  such  indorsement  is  followed  by 
the  indorsement  of  a  bank  guaranteeing  prior 
indorsements,  the  drawee  bank  is  protected 
in  making  payment  for,  while  liable  for  the 
amount  to  the  drawer  or  to  the  payee,  the 
drawee  has  full  recourse  upon  the  guaran- 
teeing bank.     Vol.  11,  p.  329,  Dec,  1918. 

580.  (Pa.)  A  drawee  bank  paid  a  check 
upon  the  forged  indorsement  of  the  payee  in 
violation  of  the  maker's  stop  payment  order. 
The  indorsement  was  expressly  guaranteed. 
Opinion:  In  this  particular  case  the  drawee 
could  recover  upon  the  special  guaranty.  In 
a  given  case  where  there  is  no  such  guaranty 
there  might  be  ground  for  a  contention  that 
a  stop  payment  notice  puts  the  drawee  on  in- 
quiry as  to  equities  which  would  estop  it  from 
recovering  from  a  bona  fide  holder.  Vol.  6, 
p.  514,  Jan.,  1914. 

581.  (Ark.)  A  drawee  bank  paid  a 
check  bearing  forgery  of  the  payee's  signature 
to  the  collecting  bank,  which  had  guaranteed 
all  prior  indorsements.  Thirty  days  elapsed 
before  the  drawer  notified  the  drawee  of  the 
forgery  and  the  drawee  in  turn  promptly 
notified  the  bank  receiving  payment,  which 
bank  refused  to  refund.  Opinion:  The 
drawee  bank  has  a  right  of  recovery  from 
the  collecting  bank  and  the  fact  that  30  days 
elapsed  before  notice  of  the  forgery  was  given 
to  the  collecting  bank,  such  bank  having  been 
notified  as  soon  as  the  forgery  was  discovered, 
does  not  bar  the  right  of  recovery.  The  rule 
is  that  notice  should  be  given  within  a  reason- 
able time  after  the  forgery  has  been  dis- 
covered.    Vol.  10,  p.  718,  April,  1918. 

Non-recovery  of  money  paid  on  forged 
indorsement 

582.  (Ohio.)  An  Ohio  bank  drew  its 
draft  upon  a  German  bank,  payable  to  A. 
The  draft  was  paid  by  the  drawee  upon  a 
forged  indorsement.  A  claims  that  neither 
the  draft  nor  its  proceeds  were  ever  received 
by  her,  and  demands  refund  of  the  purchase 


money  from  the  Ohio  bank.  Opinion :  Under 
the  German  law  the  paying  drawee  is  not  re- 
sponsible for  the  genuineness  df  indorse- 
ments. IIa<l  the  payee  received  this  draft 
over  the  counter  of  the  Ohio  bank,  she  would 
be  the  loser.  Assuming  the  draft  was  for- 
warded by  mail  to  and  never  received  by  the 
payee,  the  question  of  responsibility  would 
depend  upon  whether  the  method  of  forward- 
ing was  by  her  authority.  If  authorized,  the 
risk  of  miscarriage  would  rest  with  the  pur- 
chaser; but  if  forwarded  at  the  risk  of  the 
bank,  it  would  remain  liable  for  a  considera- 
tion never  delivered.  Vol.  5,  p.  517,  Feb., 
1913. 

583.  (S.  Dak.)  Where  the  drawee  bank  de- 
layed the  giving  of  notice  for  more  than  two 
months  after  the  discovery  of  the  forgery  of 
the  payee's  indorsement,  it  cannot  recover 
under  the  rule  adopted  in  a  number  of  States, 
provided  the  bank  receiving  payment  can 
show  that  the  delay  caused  it  a  loss.  Under 
the  rule  laid  down  by  the  United  States  Su- 
preme Court,  the  drawee  can  recover,  regard- 
less of  the  unreasonable  delay  in  giving  notice 
of  the  forgery.     Vol.  6,  p.  512,  Jan.,  1914. 

584.  (Utah.)  On  February  6th  a  bank 
cashed  a  check  upon  which  the  payee's  in- 
dorsement was  forged,  the  forger  having  been 
introduced  to  the  bank  as  the  payee  by  one  of 
its  depositors  who  left  the  city  in  April  and 
cannot  be  located.  On  June  27th  the  bank 
was  notified  of  the  forgery  by  the  payor  of 
the  check.  Opinion:  If  there  was  unreason- 
able delay  after  discovery  of  the  forgery  in 
giving  notice  thereof,  accompanied  by  loss 
sustained  by  the  bank,  the  drawee  of  the 
check  could  not  recover.  Mere  delay,  how- 
ever, in  discovering  the  forgery  is  no  defense. 
If  the  forgery  was  discovered  soon  after  the 
check  was  paid,  the  delay  in  giving  notice  to 
the  bank  might  be  a  good  defense,  assuming 
there  was  recourse,  which  was  lost,  upon  the 
depositor  who  misrepresented  the  forger  as 
the  payee.     Vol.  5,  p.  109,  Aug.,  1912. 

Indorsement  by  person  of  same  name 

See    743,    744 

585.  (Fla.)  An  indorsement  of  a  draft 
by  a  person  of  the  same  name  but  not  the 
payee  intended  is  a  forgery,  and  the  bank 
cashing  the  draft  is  responsible  for  the  loss, 
in  the  absence  of  any  negligence  on  the  part 
of  the  drawer.     Vol.  4,  p.  157,  Sept.,  1911. 

586.  (Ind.)  The  purchaser  of  a  draft 
mailed  it  to  himself  at  his  home  city  with  no 
particular  street  address,  and  draft  was  de- 


74 


FORGERY 


5d4 


livered  to  a  person  of  the  same  name,  who 
cashed  it  at  the  bank  upon  his  forged  indorse- 
ment. The  bank  collected  the  draft.  Opin- 
ion: The  indorsement  was  a  forgery  and  the 
purchasing  bank  derived  no  title  and  is  liable 
to  the  drawee.  It  is  doubtful  if  a  defense  of 
negligence  can  be  successfully  maintained. 
Vol.  2,  p.  301,  Jan.,  1910. 

587.  (La.)  A  bank  purchased  a  draft 
payable  to  "G.  Smith."  The  draft  was  in- 
dorsed by  a  person  of  the  same  name,  not  the 
real  payee.  Opinion:  The  indorsement  is  a 
forgery  and  purchaser  derived  no  title.  Vol. 
5,  p.  596,  March,  1913. 

588.  (Okla.)  A  check  payable  to  John 
Smith  was  mailed  by  the  drawer  to  the  payee, 
but  was  delivered  to  another  person  of  the 
same  name,  who  was  personally  known  to  the 
drawee,  and  who  received  payment  on  his  in- 
dorsement. Opinion:  The  indorsement  is  a 
forgery  and  the  drawee  cannot  charge  the 
amount  to  the  drawer,  in  the  absence  of  draw- 
er's negligence  in  mailing  the  check,  but  can 
recover  from  the  person  receiving  payment. 
Vol.  8,  p.  1101,  June,  1916. 

589.  (W.  Va.)  The  drawer  of  a  check 
mailed  it  to  one  J.  Smith,  to  whom  payable, 
at  No.  2701  A  Street  instead  of  No.  2701  B 
Street.  Another  J.  Smith,  who  happened  to 
live  at  the  former  address,  received  the  check 
and  cashed  it  at  a  bank,  whicTi  was  an  in- 
nocent purchaser  for  value.  Opinion:  The 
indorsement  was  a  forgery  and  the  purchaser 
took  no  title  nor  right  to  enforce  against  the 
maker.  Where  the  drawer  negligentlv  mails 
a  check  to  the  wrong  address,  and  it  gets  into 
the  hands  of  a  person  of  the  same  name,  who 
forges  the  indorsement,  an  Ohio  case  holds 
that  the  drawer  is  liable  to  the  drawee  which 
pays  the  check;  but  it  is  doubtful  that  such 
liability  wouid  extend  to  the  purchaser  of  the 
check  from  the  forger.  Vol.  7,  p.  223.  Oct., 
1914. 

590.  (W.  Va.)  A  check  was  mailed  to 
the  payee  and  delivered  to  the  wrong  person 
of  the  same  name  who  indorsed  and  nego- 
tiated it  to  a  purchaser  for  value.  Opinion: 
The  indorsement  was  a  forgery  and  the  pur- 
chaser took  no  rights,  unless  the  maker  of  the 
check  was  guilty  of  negligence  in  letting  the 
check  get  into  the  hands  of  the  wrong  person. 
Vol.  2,  p.  538,  June,  1910. 

Indorsement  by  precise  person  intended 

See  711,  712 

591.  (Idaho.)  A  railroad  pay-check 
payable  to  R.  E.  Jones  was  through  a  mistake 


delivered  by  an  agent  of  the  railroad  to  the 
wrong  person,  who  impersonated  Jones.  The 
impersonator  indorsed  the  check  R.  E.  Jones 
and  cashed  it  at  a  bank.  The  real  pavee 
seeks  to  hold  the  bank  liable.  Opinion:' It 
might  be  held  that  under  the  circumstances 
the  indorsement  was  not  a  forgery  but  by  tlie 
precise  person  intended  by  the  drawer  to 
receive  the  money,  in  which  case  the  railroad 
company  would  be  liable.  Vol.  4,  p.  3ii3 
Nov.,  1911. 

592.  (Minn.)  A  chock  is  drawn  and  de- 
livered to  an  impostor,  the  drawer  believing 
him  to  be  the  person  named  therein.  The 
impostor  indorsed  in  the  name  he  had  as- 
sumed, and  upon  being  properly  identified 
cashed  the  same  for  value  at  a  bank.  Opin- 
ion: The  bank  cashing  the  check  is  protected, 
as  the  indorsement  is  not  a  forgery,  but  by 
the  precise  person  intended  to  receive  the 
money.  The  majority  rule  is  as  above,  but 
there  are  a  few  cases  contra.  Vol.  4,  p.  157, 
Sept.,  1911. 

593.  (Mo.)  A  stranger  representing 
himself  as  B  presented  to  the  drawee  bank  a 
check  payable  to  the  order  of  B,  and  the  bank 
delivered  to  the  stranger  its  cashier's  clieck 
payable  to  the  order  of  B..  The  stranger  in- 
dorsed the  cashier's  check  in  the  name  of  B 
to  another  bank  and  that  bank  received  pay- 
ment. Opinion:  As  between  the  bank  de- 
livering the  cashier's  check  and  the  bank  re- 
ceiving payment,  the  former  would  be  the 
loser  in  the  event  the  indorsement  is  not  tliat 
of  B.     Vol.  3,  p.  733,  June,  1911. 

594.  (Ohio.)  A  savings  bank  received 
by  mail  from  an  impostor,  who  imj)ersonated 
a  depositor,  tlie  depositor's  pass-book  and  a 
forged  order  with  a  letter  rorjuesting  payment 
of  the  full  amount  due.  .\  few  days  previous 
the  pass-book  had  been  presented  with  an 
order  for  part  of  the  funds,  but  payment  was 
refused  because  the  signatures  did  not  corres- 
pond. The  savings  bank  dealt  with  the  im- 
postor, believing  him  to  be  its  depositor,  and 
mailed  to  the  impostor  in  another  city  its 
check  payable  to  tlie  depositor.  The  impos- 
tor indorsed  the  check  in  the  name  of  the  de- 
positor to  a  bank,  which  collected  it  and  then 
jiaid  the  proceeds  of  the  ciieck  to  the  impostor. 
Opinion:  The  I)ank  would  have  a  fair  ground 
of  defending  against  liability  to  the  savings 
bank  (1)  because  the  check  was  indorsed  by 
the  precise  person  intended  by  the  drawer  to 
receive  payment,  and  (2)  because  the  savings 
bank  would  probably  be  estopped  in  setting 
up  forgery  l)y  reason  of  negligence  in  mailing 
the    check    under    such    suspicious    circum- 


76 


595 


DIGEST  OF  LEGAL  OPINIONS 


stances.  As  a  furtlicr  fi^rouiul,  if  llie  bank 
could  show  that  it  appeared  on  the  check  as 
collecting  agent,  it  could  escape  liability,  after 
payment  of  the  proceeds  to  the  impostor. 
Vol.  (),  p.  823,  June,  1914. 

Effect  of  waiver  of  identification 

595.  (Mich.)  A  customer  cashed  a 
stolen  railway  pay-check  upon  a  forged  in- 
dorsement. The  check  was  drawn  on  the 
same  bank  in  which  the  customer  kept  his 
account  and  upon  deposit  the  customer's  ac- 
count was  credited.  Two  weeks  later  the 
payee  who  lost  the  check  notified  the  bank. 
The  makers  of  the  check  had  sent  the 
drawee  a  letter  in  which  they  stated :  "We 
will  waive  identification  of  the  person  pre- 
senting check  for  payment."  Opinion:  The 
customer  must  refund  to  the  bank.  The  two 
weeks  delay  will  not  affect  the  drawer's  right 
of  recovery  nor  the  payee's  claim  against  the 
company.  The  waiver  is  available  as  a  pro- 
tection only  to  the  bank  and  not  to  the 
merchant  cashing  the  check  upon  a  forged  in- 
dorsement.    Vol.  7,  p.  579,  Feb.,  1915. 

Recovery  of  money  paid  on  forged  bearer 
check 

596.  (Miss.)  The  Y  Trust  Company 
cashed  and  received  pa3'ment  of  a  forged 
check  drawn  on  the  X  Bank,  made  payable 
to  cash  or  bearer.  The  check  bore  the  sig- 
nature and  indorsement  of  E.  G.  W.,  both  of 
which  were  forgeries.  It  developed  that  the 
handwriting  of  E.  G.  W.  as  drawer  and  on 
the  back  of  the  check  was  that  of  a  former 
customer  of  the  Y  Trust  Company,  whose 
signature  they  had  on  file,  and  that  this 
person  had  disappeared  immediately  after 
the  check  was  cashed.  Opinion:  The  general 
rule  is  that  money  paid  upon  a  forged  check 
to  a  bona  fide  holder  is  not  recoverable,  but 
the  special  circumstances  in  this  case  that 
the  loss  was  incurred  before  payment  was 
received  from  the  drawee,  and  that  the  signa- 
ture and  indorsement  were  made  by  a  former 
customer  of  the  Trust  Company,  which 
should  have  kno^\^l  the  identity  of  the  person 
receiving  the  cash,  and  that  he  was  not 
R.  G.  W.,  would  probably  be  held  to  modify 
the  general  rule  and  permit  recovery.  Vol. 
4,  p.  428,  Jan.,  1912. 

597.  (N.  Y.)  A  customer  presents  a 
forged  bearer  check  to  the  drawee,  indorses 
it,  and  receives  the  money.  The  forgery  is 
discovered  the  same  day.  The  question  arises 
as  to  the  drawee's  right  of  recovery.     Opin- 


ion: Under  the  general  rule  money  paid  upon 
a  forged  check  is  not  recoverable.  A  lower 
New  York  court  has  held  that  where  a  forged 
bearer  check  is  indorsed  by  tlie  person  re- 
ceiving papnent,  this  constitutes  an  excep- 
tion to  the  rule,  as  the  indorsement  is  un- 
necessary and  tends  to  divert  the  drawee  from 
scrutiny  of  the  drawer's  signature;  but  this 
decision  has  not  been  taken  to  the  highest 
court  and  has  been  criticized.  Vol.  4,  p. 
156,  Sept.,  1911. 

Signature  and  indorsement  both  forged 

598.  (Cal.)  A  bank  paid  a  check  upon 
which  the  signatures  of  both  drawer  and 
payee  were  forged,  and  payment  was  made  to 
the  supposed  payee  upon  the  indorsement  of 
one  T,  a  customer  of  the  bank,  below  the 
forged  indorsement  of  the  payee.  Opinion: 
The  bank  could  recover  from  T  on  his  breach 
of  warranty  of  the  genuineness  of  the  forged 
indorsement.     Vol.  2,  p.  188,  Nov.,  1909. 

599.  (Conn.)  A  bank  paid  several 
forged  checks,  upon  which  the  indorsement  of 
the  payee,  a  fictitious  person,  was  also 
forged.  Opinion:  The  decisions  are  in  con- 
flict upon  the  drawee's  right  of  recovery  from 
the  bank  to  which  the  checks  were  paid.  In 
Connecticut  the  question  has  not  been  passed 
upon.     Vol.  8,  p.  1014,  May,  1916. 

600.  (La.)  A  presented  a  check  signed 
by  B  and  indorsed  in  blank  by  the  payee. 
The  check  was  paid  by  the  drawee,  and  upon 
faith  of  such  payment  A  paid  over  the  pro- 
ceeds. Later  it  was  discovered  that  B's  sig- 
nature was  forged.  Opinion:  The  drawee 
cannot  recover  from  the  bona  fide  holder.  If 
payee's  indorsement  was  also  forged,  author- 
ities conflict  as  to  drawee's  right  of  recovery. 
The  decisions  in  Illinois  and  Nebraska  allow 
recovery,  while  a  decision  in  Iowa  denies 
right  of  recovery.     Vol.  4,  p.  25,  July,  1911. 

601.  (Neb.)  Two  checks  were  drawn  on 
a  Nebraska  bank  on  which  the  signatures  of 
both  the  drawer  and  of  the  payee  were  forged. 
These  checks  were  cashed  for  the  forger  by 
two  banks  in  Nebraska  and  indorsed  over  to 
two  banks  in  Iowa,  which  banks  received 
payment  from  the  drawee  bank.  Opinion: 
Under  the  law  of  Nebraska  the  drawee  can 
recover  from  the  last  endorser  as  warrantor 
of  a  prior  forged  indorsement.  Under  the 
law  of  Iowa  the  drawee  could  not  recover. 
Vol.  3,  p.  588,  April,  1911. 

602.  (N.  Y.)  A  bank  in  New  York,  a 
bona  fide  holder,  cashed  a  check  iipon  which 
the  drawer's  signature  and  the  payee's  in- 


76 


FORGERY 


608 


dorsement  were  forged.  Opinion:  Under  the 
New  York  law  the  drawee  bank  which  paid 
the  check  is  the  loser,  and  cannot  recover  from 
the  New  York  bank.  Vol.  5,  p.  448,  Jan., 
1913. 

603.  (Okla.)  A  drawee  bank  paid  a 
check  upon  which  the  drawer's  signature  and 
the  payee's  indorsement  were  forged.  The 
bank  receiving  payment  stamped  the  check 
"prior  indorsements  guaranteed."  Opinion: 
The  question  of  drawee's  right  of  recovery 
has  never  been  passed  upon  in  Oklahoma.  The 
decisions  of  other  states  on  this  proposition 
are  conflicting.     Vol.  8,  p.  35,  July,  1915. 

604.  (Wash.)  A  forged  check  bearing 
a  forged  indorsement  was  deposited  in  a 
bank  by  its  customer  and  paid  through  the 
clearing  house  by  the  drawee.  The  drawee 
returned  the  check  to  the  collecting  bank  with 
notation  "forged  indorsement."  Before 
charging  the  customer  with  the  amount,  it 
was  discovered  that  the  drawer's  signature 
was  also  forged,  and  the  collecting  bank 
seeks  to  hold  the  drawee  liable.  Opinion: 
Where  the  drawer's  signature  and  payee's  in- 
dorsement are  both  forged,  the  decisions  con- 
flict as  to  the  drawee's  right  to  recover  money 
paid  on  check  to  a  bona  fide  holder.  In 
Washington,  the  drawee  paying  the  forged 
check  is  held  entitled  to  recover  unless  the 
holder  receiving  payment  would  be  in  a  worse 
position  if  compelled  to  refund  than  before 
he  received  payment.  Vol.  11,  p.  96,  Aug., 
1918. 

Statute  of  Limitations  as  applied  to  forged 
indorsement 

605.  (Cal.)  A  bank  paid  a  check  which 
bore  a  forged  indorsement.  A  year  and  two 
months  later  it  was  notified  of  such  forgery. 
A  statute  in  California  provides  a  one  year 
limitation  for  the  commencement  of  an  ac- 
tion "by  a  depositor  against  a  bank  for  the 
payment  of  a  forged  or  raised  check."  The 
bank  is  uncertain  as  to  whether  said  statute 
covers  forged  indorsements.  Opinion:  A 
New  Jersey  case  holds  that  such  a  statute 
applies  to  forged  indorsements,  but  it  is 
doubtful  whether  the  courts  will  construe  the 
statute  in  California  to  cover  forged  indorse- 
ments. It  is  probable  that  it  was  the  inten- 
tion tliat  the  statute  should  apply  to  a  check 
bearing  forgery  of  drawer's  signature,  or  to  a 
raised  check,  and  that  the  limitation  applies 
to  depositors  who  are  negligent  in  failing  to 
discover  the  forgery  or  alteration  and  notify 
the  bank.     Vol.  11,  p.  435,  Feb.,  1919. 


606.  (N.  J.)  A  bank  paid  a  check  with 
a  forged  indorsement.  The  question  is  asked 
how  long  after  such  pa}'ment,  or  the  return 
of  the  check  to  the  maker,  has  the  maker  a 
right  of  action  for  the  recovery  from  the 
paying  bank.  Opinion:  Where  a  bank  pays 
a  check  upon  a  forged  indorsement  and  re- 
turns the  item  to  the  depositor  as  a  paid 
voucher,  the  latter's  right  of  action  for  the 
deposit,  in  the  absence  of  specific  statute  upon 
the  subject,  does  not  accrue  until  demand 
made  and  the  statute  of  limitations  does  not 
begin  to  run  until  the  bank  is  in  default, 
unless  the  bank  has  disclaimed  liability  so  as 
to  make  demand  unnecessary,  in  which  case 
riglit  of  action  would  accrue  at  time  bank  is  in 
default  by  such  denial  and  would  be  barred 
within  six  years.  New  Jersey  and  a  large 
number  of  states  have  passed  the  following 
statute :  "No  bank  shall  be  liable  to  a  depos- 
itor for  the  payment  by  it  of  a  forged  or 
raised  clieck,  unless  within  one  year  after 
the  return  to  the  depositor  of  the  voucher  of 
such  payment  such  depositor  shall  notify  the 
Ijank  that  the  check  so  paid  was  forged  or 
raised."  It  is  doubtful  whether  this  statute 
will  be  held  to  apply  to  actions  by  a  depositor 
against  his  banker  for  money  paid  on  checks 
bearing  forged  indorsements.  Vol.  10,  p. 
718,  April,  1918. 

607.  (N.  J.)  There  is  a  statute  in  Now 
Jersey  which  limits  the  liability  of  a  bank  to 
its  depositor  for  the  payment  of  forged  or 
raised  checks  to  one  year  after  tlie  return  of 
the  voucher,  unless  notice  is  given  the  bank. 
A  certain  New  Jersey  decision  seems  to  take 
the  view  that  this  statute  covers  the  payment 
of  a  check  upon  a  forged  indorsement,  but 
the  point  was  not  positively  decided  and  sucii 
statute  has  not  been  generally  understood  to 
cover  forged  indorsements  as  distinguished 
from  forged  or  raised  checks.  Vol.  4,  p.  221, 
Oct.,  1911. 

Forged  counter-signature   to   traveler's 
check  or  money  order 

608.  (Mo.)  An  express  company  tra- 
velers' check,  upon  which  there  was  a  forged 
countersignature  of  the  purciiaser,  was  cashed 
])y  a  bank  for  a  stranger  and  paid  by  the  ex- 
])ress  company.  The  signature  of  tiie  pur- 
chaser was  placed  upon  the  check  at  the  time 
it  was  issued  by  the  company.  Opinion: 
])<>th  bank  and  express  company  had  equal 
means  of  knowing  genuineness  of  counter- 
signature, and  the  express  company  could 
recover  from  the  bank  which  received  pay- 
ment under  the  rule  that  money  paid  under 


77 


009 


DIGEST  OF  LEGAL  OlMNIONS 


a  mutual  mistake  of  fact,  without  coiiHiflo ra- 
tion, is  recoverable.  Vol.  2,  ]>.  IKl  April, 
1910. 

609.  (Tex.)  A  travelers'  cheek,  sold  by 
a  bank  in  Nebraska,  issued  to  one  II,  and  pur- 
chased by  a  bank  in  Texas,  was  lost  by  II,  and 
his  countersignature  thereon  was  forged. 
Opinion:  That  the  Texas  bank  having  cashed 
the  check  upon  the  forgery  took  no  title  and 
must  look  solely  to  the  person  from  whom  it 
purchased  for  reimbursement.  Vol.  6,  p. 
816,  Jime,  1914. 

610.  (W.  Va.)  A  bank  became  the  in- 
nocent purchaser  of  an  express  money  order 
bearing  the  forged  countersignature  of  the 
issuing  agent.  The  order  was  paid  by  the 
company  before  the  forgery  was  detected. 
Opinion:  In  the  absence  of  decided  cases  on 
the  right  of  an  express  company  to  recover 
money  paid  on  the  forged  countersignature 
of  an  agent,  the  question  depends  upon 
whether  the  courts  will  apply  the  rule  (1) 
that  money  paid  under  mistake  of  fact  is  re- 
coverable, or  (2)  that  the  payment  is  final 
and  irrevocable  on  the  theory  (a)  that  the 
paying  agent  is  bound  to  know  the  signature 
of  the  countersigning  agent,  and  (b)  that  be- 
tween parties  equally  innocent  the  law  will 
place  the  loss  where  the  course  of  business  has 
placed  it.     Vol.  5,  p.  668,  April,  1913. 

Check  signed  in  fictitious  name 

611.  (N.  Y.)  A  person  signs  a  check  in 
a  fictitious  name  with  intent  to  defraud.  The 
question  is  raised  as  to  whether  he  can  be 
punished  as  a  forger  or  whether  the  crime 
is  simply  that  of  larceny  or  obtaining  money 
under  false  pretenses  when  he  actually  ob- 
tains money  or  property  thereon,  or  whether 
he  can  be  punished  under  some  of  the  special 
statutes  making  criminal  the  mere  issuing  of 
checks  against  insufficient  funds.  Opinion: 
According  to  the  decisions  in  the  various 
courts,  it  is  well  settled  that  the  signing  of 
a  check  in  a  fictitious  name,  with  intent  to 
defraud,  is  a  forgery.  The  importance  of 
this  question  lies  in  the  fact  that  the  penalty 
for  forgery  is  more  severe  than  in  the  other 
offenses  above  stated  and  it  is  more  desirable 
to  prosecute  under  the  forgery  statutes.  Vol. 
9,  p.  492,  Dec,  1916. 

Indorser's  warranty  to  subsequent 
purchaser 

612.  (111.)  A  bank  cashed  a  check,  pay- 
ment of  which  was  refused  on  the  ground  that 
the  drawer's  signature  was  a  forgery.     The 


bank  sought  to  recover  tli(;  amount  from  the 
indorser.  Opinion:  The  indorser  of  the  check 
warrants  the  genuineness  of  the  check  to  a 
subsequent  purchaser  and  if  the  check  is 
forged  is  liable  upon  breach  of  such  warranty. 
Vol.  i),  p.  656,  Feb.,  1917.  See  556,  560, 
737. 

Estoppel  to  assert  forgery  of  indorsement 

613.  (111.)  A,  the  maker,  forges  the  in- 
dorsements of  B  and  C  to  his  note,  which  is 
discounted  for  A  by  a  bank.  At  maturity  B 
and  C  are  notified  but  pay  no  attention  there- 
to, and  afterwards  B  sees  the  note  and  instead 
of  disclosing  the  forgery,  says  he  will  en- 
deavor to  get  A  to  renew  with  additional  in- 
dorsers.  Afterwards,  upon  A's  death,  leav- 
ing no  estate,  B  and  C  assert  forgery.  Opin- 
ion: If  C's  silence  when  it  was  his  duty  to 
speak,  and  B's  affirmative  representation  of 
the  genuineness  of  the  indorsements  were  in- 
tended to  and  did  prevent  the  bank  from  pro- 
tecting itself  from  the  loss,  there  would  seem 
fair  ground  for  holding  B  and  perhaps  C 
liable.     Vol.  8,  p.  1099,  June,  1916. 

614.  (N.  Y.)  The  maker  of  a  note  upon 
which  the  indorser's  name  is  forged  lets  it  go 
to  protest.  The  purported  indorser,  upon 
being  notified  and  questioned,  does  not  in- 
form the  bank  of  the  forgery,  but  makes  an 
evasive  reply.  After  the  dishonor  of  a  second 
note  likewise  forged,  the  purported  indorser 
for  the  first  time  notified  the  bank  of  both 
forgeries.  The  maker  died  insolvent.  Opin- 
ion: The  purported  indorser  is  liable  if  he 
knew  of  the  forgery  of  the  first  note  and  his 
failure  to  notify  the  bank  caused  a  loss.  Vol. 
6,  p.  208,  Sept,.  1913  . 

Liability  of  person  identifying 
impersonator 

615.  (Ark.)  A  bank  cashed  a  forged 
draft  for  a  forger  identified  at  the  bank  by  A. 
Opinion:  A  is  liable  to  the  bank,  provided 
he  made  a  false  statement  of  fact  upon  which 
the  bank  relied  to  its  injury.  Vol.  7,  p.  167, 
Sept.,  1914. 

616.  (Colo.)  The  customer  of  a  bank 
who  identified  the  holder  of  a  forged  check  as 
the  payee  is  liable  to  the  bank  cashing  the 
check,  because  of  a  false  representation, 
though  innocentlv  made.  Vol.  6,  p.  275, 
Oct.,  1913. 


617. 


Forged  name  of  drawee 
(Okla.)     A's  check  on  D  bank,  in- 


dorsed by  B,  is  paid,  and  afterwards  A  trans- 


78 


FEAUD  AND  CRIMES 


625 


fers  his  account  to  C  bank.  One  year  later 
the  same  check  with  date  altered,  name  of 
drawee  changed  to  C  bank,  and  hearing  an 
additional  indorsement  under  that  of  B,  is 
presented  by  D  bank  to  C  bank  and  paid.  The 
cashier  of  1)  bank  does  not  know  where  he  got 
the  check  and  refuses  to  make  its  amount 
good  to  C  bank.  Opinion:  C  bank  can  re- 
cover from  I)  bank  which  first  cashed  the  al- 
tered check,  under  the  rule  that  money  paid 
under  a  mutual  mistake,  without  considera- 
tion, is  recoveral)le.  Vol.  4,  p.  308,  Nov.. 
1911. 

Altering  name  of  drawee  on  forged  check 

618.  (Neb.)  A  check  signed  "II. 
Greve/'  whose  signature  was  forged  by  the 
payee,  was  presented  by  the  payee  to  the  First 
National  Bank  of  X,  Nebraska,  as  drawee. 
That  bank,  having  no  account  with  Greve, 
took  it  to  the  X  National  Bank,  where  Greve 
had  an  account,  struck  out  the  word  "First," 
inserted  "X,"  indorsed  the  check,  received  the 
money  and  paid  over  the  proceeds  to  the 
payee.  Opinion:  In  view  of  the  policy  of  the 
Nebraska  courts  to  place  the  responsibility  in 
case  of  a  forged  check  upon  the  bank  which 


first  takes  it  from  the  forger,  rather  than 
upon  the  drawee  which  mistakes  the  signature 
and  pays  it,  as  between  the  two  banks,  the 
First  National  Bank  would  be  responsible  for 
the  loss.     Vol.  2,  p.  415,  April,  1910. 

Forged  draft  against  lost  letter  of  credit 

619.  (Wyo.)  A  bank  purchasing  a 
forged  draft  against  a  lost  letter  of  credit  is 
the  loser  unless  the  draft  is  paid  by  the 
drawee,  in  which  case  the  latter  would  prob- 
ably be  bound  by  payment.  Vol.  G,  p.  817, 
Juno.  1914.     See  812. 

Check  dated  on  Sunday 

620.  (Ind.)  A  decision  in  Michigan 
holds  that  the  uttering  of  a  forged  check, 
dated  on  Sunday,  is  not  a  crime  because  an 
instrument  void  on  its  face  cannot  be  the 
subject  of  forgery.  The  decisions  bearing  on 
the  subject  of  the  forgery  of  checks,  dated  on 
Sunday,  both  in  states  where  the  common 
law  prevails  that  Sunday  contracts  are  valid, 
and  in  states  where  such  contracts  are  made 
void  by  statute,  are  collected  and  discussed  in 
Vol.  4,  p.  547,  March,  1912. 


FRAUD  AND  CRIMES 


Criminal  liability  for  issuing  bad  checks 

Note:  A  statute  rccommcMided  by  tlie  American 
Bankers  Association  to  punish  the  giving  of  cliecks 
or  drafts  without  sufliciont  funds  in  bank  and 
making  the  issue  of  the  insufficient  check  prima 
facie  evidence  of  intent  to  defraud  lias  })een  passed 
in  nearly  all  tlie  states,  with  various  modifica- 
tions. States  still  needing  this  law  arc  Mary- 
land, Massachusetts,  Oklahoma  and  Pennsylvania; 
also  the  District  of  Columbia. 

621.  (Ark.)  Where  a  per.son  gave  a 
worthless  check  and  obtained  money  or  any- 
thing of  value  therefor,  he  could  be  prosecuted 
criminally,  but  if  he  simply  gave  the  check 
in  payment  of  some  existing  indebtedness, 
there  would  not  be  a  criminal  offense.  Vol. 
6,  p.  36,  July,  1913. 

622.  (Colo.)  A  corporation  having  its 
account  in  a  Colorado  bank  has  been  in  the 
habit  of  overdrawing.  The  bank  seeks  to 
punish  the  president  and  treasurer  of  the  cor- 
poiation,  although  none  of  the  checks  bear 
their  signatures.  Opinion :  Where  a  st^itute 
makes  it  a  misdemeanor  for  any  person,  with 
intent  to  defraud,  to  issue  a  check  upon  a 
bank  wherein  the  maker  lias  insuflicient 
funds,  and  a  corporation  depositor  habitually 
overdraws  its  account,  the  corporation  as  well 


as  the  issuing  officer  is  liable  to  prosecution, 
and  the  president  and  treasurer  who  do  not 
sign  such  checks  but  have  knowledge  of  and 
power  to  prevent  their  issue  are,  probably, 
also  subject  to  jirosecution.  Vol.  11,  p.  42, 
July,  1918. 

623.  (Fla.)  A  owed  a  bank  $500.  evi- 
denced by  a  note  which  at  maturity  the  bank 
agreed  to  renew.  A  sent  a  renewal  note  upon 
which  the  bank  surrendered  the  original.  A 
also  sent  a  worthless  check  for  the  advance 
interest.  Ojnnion:  The  giving  of  the  worth- 
less check  did  not  violate  the  Florida  criminal 
law.s,  because  A  did  not  obtain  anything  of 
value  thereby.     Vol.  5,  p.  171,  Sept..  1912. 

624.  (111.)  A  person  in  Illinois  negoti- 
ated a  worthless  check  against  an  account  in 
which  he  had  only  a  nominal  Italance  of  48 
centos.  The  drawee  bank  had  refu.^ed  many 
similar  checks  and  the  depositor  could  not 
claim  that  he  thought  he  had  money  on  de- 
posit. Ojnniou:  The  person  could  be  pun- 
ished (  riiniiuilly  for  obtaining  money  under 
false  preten.ses  and  with  intent  to  defraud. 
Vol.  8,  p.  39.  July,  1915. 

625.  (Kan.)  A  person  issued  a  check 
on  a  Kansas  bank  where  he  never  carried  an 


79 


62G 


DIGEST  OF  LEGAL  OPINIONS 


account.  Tlie  bank  seeks  to  liold  liini  liable 
for  obtaining  money  under  false  pretenses. 
Opinion:  The  burden  is  upon  the  state  to 
prove  the  drawer's  intent  to  defraud,  but  it  es- 
tul)lif;lics  a  prima  facie  case  vhcre  it  sliows 
that  the  drawer  issued  a  check  on  a  bank 
where  he  never  carried  an  account.  Vol.  5, 
p.  83'.\  July,  1013. 

626.  (Mich.)  A  man  drew  two  checks 
on  his  bank  in  Wasliington  without  having 
sufficient  funds  to  meet  them,  and  obtained 
cash  thereon  from  a  bank  in  ^lichigan.  The 
drawer  has  returned  to  Washington.  Opin- 
ion: The  purchasing  bank  can  bring  an  action 
to  recover  the  amount  of  the  protested  checks. 
If  the  drawer  can  be  located  in  Michigan,  he 
probably  can  be  punished  criminally  for  ol)- 
taining  money  under  false  pretenses.  A^ol. 
3,  p.  585,  April,  1911. 

627.  (S.  Dak.)  xV  person  issued  checks 
on  a  bank  in  South  Dakota  where  he  never 
had  an  account.  Under  the  law  of  that  state 
he  is  guilty  of  a  felony  where  he  either  ob- 
tains or  attempts  to  obtain  money  or  prop- 
erty thereon.  There  is  no  statute  in  South 
Dakota  similar  to  that  enacted  in  several  of 
the  states,  which  makes  the  mere  issuing  of 
a  "not  good"  check,  with  intent  to  defraud, 
a  crime.    Vol.  3,  p.  335,  Dec,  1910. 

Obtaining  bill  of  lading  under  false 
pretenses 

628.  (Ala.)  A  bank  received  for  collec- 
tion a  draft  with  a  bill  of  lading  attached. 
The  consignee  obtained  the  bill  of  lading 
upon  tender  of  a  check  to  the  bank  and  re- 
ceived the  goods.  The  consignee,  asserting 
that  the  freight  on  the  goods  was  not  prepaid, 
stopped  payment  on  the  check,  but  at  the 
same  time  retained  the  goods  and  refused  to 
pay  the  bank.  Opinion:  The  consignee  can 
be  convicted  of  obtaining  goods  under  false 
pretenses  if  it  can  be  proved  that,  at  the  time 
he  gave  his  check  in  order  to  get  the  bill  of 
lading  and  the  goods,  he  intended  to  stop 
pajTnent.  The  action  must  be  brought  with- 
in three  years  if  a  felony,  and  within  one  year 
if  a  misdemeanor.     Vol.  6,  p.  99,  Aug.,  1913. 

Burglary  policy  of  the  American  Bankers 
Association 

629.  (Miss.)  The  American  Bankers 
Association  Burglary  Policy  covers  opening 
safes  by  "chemicals  or  electricity,"  as  well  as 
by  "tools  or  explosives."  Vol.  5,  p.  246,  Oct., 
1912. 


Conspiracy  to  commit  robbery 

630.  (Ark.)  A  person,  learning  that  a 
shipment  of  currency  is  to  be  made  by  one 
bank  to  another,  proposed  to  another  person 
to  commit  robbery,  pointing  out  the  subject 
of  the  robbery  and  outlining  a  plan;  but  the 
second  person  refused  and  the  first  person 
went  no  further.  Opinion:  The  first  person 
was  guilty  of  a  misdemeanor  in  soliciting  a 
person  to  commit  robbery.  Vol.  8,  p.  39, 
July,  1915. 

Conversion  of  notes  by  innkeeper 

631.  (Fla.)  W.  S.  S.,  a  lodger  at  a 
boarding  house,  died,  and  among  his  effects 
were  two  notes  for  $200  and  $180  respec- 
tively, which  were  not  indorsed  by  him. 
W.  W.  S.,  the  boarding-house  keeper,  indorsed 
the  notes  in  his  own  name,  cashed  them  at  a 
bank,  and  appropriated  the  money  thus  col- 
lected in  satisfaction  of  an  alleged  board  bill. 
The  makers  who  through  a  Nebraska  bank 
paid  the  notes  are  sued  by  the  estate  of 
W.  W.  S.  Opinion:  The  innkeeper  in  col- 
lecting the  notes  in  the  method  used  was 
guilty  of  conversion,  and  the  makers  are  still 
liable  to  the  estate,  although  the  makers  in 
turn  can  recover  from  the  Nebraska  bank  the 
money  as  having  been  paid  under  a  mistake 
of  fact  without  consideration;  and  the  Ne- 
braska bank  can  recover  from  W.  W.  S.  on  the 
same  grounds.  W.  W.  S.  would  not  be  crim- 
inally liable  for  larceny  or  embezzlement  if  it 
could  be  shown  he  collected  the  notes  in  good 
faith  under  a  supposed  claim  of  title.  Vol. 
4,  p.  619,  April,  1912. 

Delivery  of  goods  without  taking  up 
w^arehouse  receipt 

632.  (N.  Y.)  The  Uniform  Warehouse 
Receipts  Act  passed  in  Louisiana  in  1908 
among  other  provisions  contains  one  punish- 
ing an  officer  or  agent  of  a  warehouse  who 
delivers  goods  represented  by  a  negotiable 
receipt  without  taking  up  the  receipt.  Vol. 
1,  p.  204,  Dec,  1908. 

Fidelity  bonds 

633.  (Cal.)  Upon  application  for  re- 
newal of  a  fidelity  bond  for  its  employee,  a 
banking  corporation  upon  request  execut-es  a 
certificate  to  the  surety  company  stating 
that  his  books  and  accounts  have  been  ex- 
amined and  found  correct  in  every  respect. 
A  loss  through  a  dishonest  employee  was 
thereafter    discovered,    wliich    had    actually 


80 


FRAUD  AXD  CRIMES 


[640 


taken  place  during  the  life  of  the  original 
policy.  Opinion:  The  surety  company  would 
be  liable  for  the  loss  under  the  original  policy 
and  the  certificate  of  renewal  would  not  affect 
such  liability.  The  execution  of  such  form 
of  renewal  certificate  is  objectionable  from  a 
banker's  standpoint  because  there  is  danger 
that  the  renewal  bond  may  be  declared  by  the 
courts  to  be  void  if  the  certificate  is  regarded 
as  a  false  representation  of  a  material  fact. 
Vol.  5,  p.  26,  July,  1912. 

634.  (N.  Y.)  The  teller  of  a  bank  without 
authority  dishonestly  allows  overdrafts  and 
hides  them  from  the  management  of  the  bank. 
The  bank  holds  the  American  Bankers  As- 
sociation's Standard  Form  of  Fidelity  Bond. 
Opinion:  Such  bond  insures  the  bank  against 
any  loss  that  shall  happen  '^through  the  dis- 
honesty of  any  of  the  (bonded)  employees 
or  through  any  act  of  omission  or  commissioTi 
of  any  of  the  employees  done  or  omitted  in 
bad  faith  and  not  through  mere  negligence, 
incompetency  or  error  in  judgment.  This 
bond  is  broad  enough  to  cover  the  loss  in  this 
case.  Bad  faith  and  dishonesty  is  the  test 
by  which  liability  under  the  bond  is  deter- 
mined.    Vol.  6,  p.  684,  April,  1914. 

Firm  checks  issued  through  fraud 
of  employee 

635.  (Tenn.)  A  firm  through  tlie  fraud 
of  an  employee  signed  checks  (1)  payable  to 
the  order  of  the  employee,  (2)  payable  to  the 
order  of  the  X  bank,  and  (3)  payable  to 
other  persons  bearing  forged  indorsements  of 
the  payees.  These  checks  were  all  deposited 
by  the  employee  in  the  X  bank  and  checked 
out  by  the  employee,  and  the  firm  seeks  re- 
imbursement from  the  bank.  Opinion:  (1) 
As  to  the  checks  payable  to  the  employee,  the 
X  bank  is  not  responsible  to  the  firm;  (2)  as 
to  the  checks  payable  to  the  X  bank,  there  is 
conflict  of  authority  whether  or  not  the  bank 
is  responsible;  and  (3)  as  to  checks  payable 
to  third  persons  whose  indorsements  were 
forged,  the  bank  is  responsible,  according  to 
the  weight  of  authority,  notwithstanding  the 
trust  and  confidence  imposed  by  the  firm  in 
the  employee.     Vol.  1,  p.  96,  Sept.,  1908. 

Introducing  swindler  to  bank 

636.  (Tenn.)  A  bank  cashed  a  check 
in  the  sum  of  $105  for  a  stranger  who  was 
correctly  introduced  by  a  customer  using 
these  words :  "This  man  is  all  right,  ])lease 
wait  on  him."  The  stranger  was  a  swindler, 
and  his  check  was  no  good.  Opinion:  The 
customer  was  not  liable  for  the  swindler's 


fraud  because  his  statement  was  a  matter  of 
opinion  and  not  of  fact.  Vol.  2,  p.  20,  Julv, 
1909.     See  182,  615,  616. 

Obtaining  money  under  false  pretenses 

Sue    28 1,    04U 

637.  (Pa.)  A  customer  drew  two  checks, 
for  $200  and  $300  respectively.  Although 
the  customer's  deposit  was  insufficient  the 
bank  promised  to  pay  the  checks  upon  the 
customer's  false  promise  that  he  would  have 
enough  money  to  cover  the  checks  when  his 
wagons  came  in  the  next  morning.  The 
checks  were  paid,  but  the  customer  closed  out 
his  business  without  reimbursing  the  bank. 
Opinion:  The  customer  could  not  be  held 
criminally  for  obtaining  money  under  fals-.* 
pretenses,  because  the  pretense  relied  upon  by 
the  bank  must  relate  to  a  past  or  an  existing 
fact  and  not  upon  any  representation  as  to 
the  future,  as  in  this  ease,  Vol.  4,  p.  427, 
Jan.,  1912. 

638.  (Tenn.)  A  daughter  signed  her 
father's  name  to  a  check  per  her  own  and 
cashed  it  at  a  bank.  Payment  of  the  check 
was  refused  because  tlie  father,  upon  beinof 
notified  of  the  check  by  the  drawee,  refused 
to  pay  any  attention  to  it.  Twice  before  the 
daughter  had  signed  such  checks,  the  first 
one  being  paid  Init  the  second  refused,  the 
daughter  afterwards  inducing  her  fatiier  to 
settle.  The  forwarding  bank  delayed  two 
months,  expecting  either  the  father  or  daugh- 
ter to  settle.  Opinion:  If  the  check  was  un- 
authorized, the  daughter  can  be  prosecuted 
criminally  for  obtaining  money  under  false 
pretenses,  but  not  for  forgery.  The  bank  has 
no  recourse  against  the  father  but  only 
against  tlie  daughter,  and  its  delay  would  not 
affect  its  rights.     Vol.  6,  p.  98,  Aug.,  1913. 

639.  (Wyo.)  A  bank  in  Wyoming  asked 
its  correspondent  at  L.  to  pay  Mr.  F.  $100, 
wliich  was  due  him  from  a  bank  in  >raryl;ind. 
In  the  meantime  and  through  error  the  ^fary- 
land  bank  wired  the  correspondent  at  L.  to 
l)ay  Mr.  F.  $100.  :\rr.  F.  received  the  $20(», 
knowing  that  he  was  only  entitled  to  $1(KI. 
Opinion:  A  person  receiving  money  knowing 
he  is  not  entitled  to  it,  from  one  who  believes 
he  is  entitled  to  it,  without  making  any  other 
false  representiition  or  preten.«;e.  is  proliably 
not  guilty  of  a  crime  under  the  false  pretense 
statute  of  \Vvomin<r.  Vol.  5,  p.  98,  Aug., 
1912. 

Passing  worthless  state  bank  bill 

640.  (Tenn.)  A  person  passing  for  value 
a  genuine  but  worthless  bill  of  a  state  bank 


81 


641 


DIGEST  OF  LECAL  OPINIONS 


no  longer  in  existence,  is  not  guilty  of  any 
crime  under  the  Federal  law,  but  might  in  a 
proper  case  be  held  under  a  state  statute  pun- 
ishing the  obtaining  of  money  under  false 
pretense.     Vol.  4,  p.  426,  Jan.,  1912. 

Photographing  United  States  notes 

641.  (Pa.)  The  United  States  Criminal 
Code  prohibits  the  making  of  photographs  of 
any  obligation  or  other  security  of  the  United 
States,  except  under  authority  of  the  Secre- 
tary of  the  Treasury.  Vol.  9,  p.  900,  May, 
1917. 

Possession  of  forged  instrument  with 
intent  to  defraud 

642.  (Ark.)  A  person  of  criminal  ten- 
dencies has  in  his  possession  and  exhibits  a 
forged  certified  check  in  the  sum  of  $5,000 
upon  a  bank  in  another  state,  but  so  far  as 
known  has  made  no  attempt  to  realize  any- 
thing on  the  instrument.  Opinion:  A  per- 
son may  be  convicted  of  forgery  by  having 
possession  of  a  forged  instrument  with  intent 
to  defraud,  although  never  uttered  by  him, 
but  unless  something  was  said  or  done  by 
the  possessor  to  indicate  an  intent  to  defraud, 
the  mere  possession  of  the  forged  instrument 
would  not  constitute  a  crime.  Vol.  8,  p.  39, 
July,  1915. 


Renunciation  of  interest  by  heir  procured 
by  fraud 

643.  (Kan.)  A  died  without  a  will, 
leaving  a  widow  and  no  children.  His  estate 
consisted  of  320  acres  of  land  and  other  prop- 
erty worth  $10,000.  The  widow  falsely  rep- 
resented to  A's  sister  that  it  was  necessary  to 
obtain  her  afhdavit  renouncing  lier  interest  in 
her  brother's  estate  in  order  to  probate  the 
estate.  On  these  representations  the  sister 
gave  her  affidavit.  Opinion:  A  court  of 
equity  would  revoke  the  sister's  renunciation 
and  enable  her  to  claim  her  share  as  heir  of 
the  estate.     Vol.  6,  p.  821,  June,  1914. 

Statement  to  procure  credit 

544.  (Conn.)  The  question  is  raised  as 
to  whether  the  requirement  of  verification 
under  oath  by  the  maker  of  a  statement  of 
his  financial  condition  for  the  purpose  of  pro- 
curing credit,  would  result  in  the  imposition 
of  a  heavier  i^enalty  in  case  of  falsity  than 
where  the  statement  is  unsworn.  Opinion: 
The  taking  of  a  false  oath  by  the  maker  of  a 
false  financial  statement  would  not  be  per- 
jury, the  statement  not  being  required  by  law 
or  made  in  a  judicial  proceeding.  It  would 
be  "false  swearing,"  but  as  such  is  not  a 
crime.  The  only  effect  of  requiring  a  sworn 
statement  would  seem  to  be  the  moral  effect 
upon  the  judge  in  whose  discretion  rests  the 
severity  of  the  penalty.  Vol.  11,  p.  610,  May, 
1919.  " 


HOLDER  IN  DUE  COURSE 


Rediscounted  note 

645.  (Cal.)  A  negotiable  note  payable 
to  a  national  bank  is  rediscounted  with  a 
Federal  Eeserve  Bank  and  the  maker  without 
knowledge  thereof  and  before  maturity,  pays 
the  note  to  the  national  bank,  which  misap- 
propriates the  money  and  two  days  later  closes 
its  doors.  The  maker  did  not  obtain  a  sur- 
render of  the  note.  The  Federal  Reserve 
Bank  demands  payment  of  the  note.  Opin- 
ion: The  maker  is  liable  on  the  note  to  the 
Federal  Eeserve  Bank,  which  is  a  holder  in 
due  course,  but  is  probably  entitled  to  pre- 
ferred payment  for  the  full  amount  from  the 
assets  of  the  failed  national  bank.  Vol.  11, 
p.  560,  April,  1919. 

Holder  in  due  course  of  stopped  check 

See    1235,   1265   et  scq 

646.  (Cal.)  A  gave  B  a  check  for  $500 
which  was  indorsed  by  B  to  C  and  was  sup- 


posed to  cover  the  pay  roll  of  B.  C  issued  his 
checks  payable  to  B's  employees  and  later  dis- 
covered that  A's  check  was  not  good.  C 
then  stopped  payment  of  his  checks.  Opin- 
ion :  Under  the  common  law  rule  the  payees  of 
C's  checks  are  protected  as  holders  in  due 
course  and  as  such  they  are  free  from  C's  de- 
fense of  fraud  or  lack  of  consideration,  which 
he  mav  have  against  B.  Vol.  9,  p.  419,  Nov., 
1916.' 

647.  (Ind.)  A  purchased  a  draft  of 
Bank  B,  drawn  on  Bank  iST,  payable  to  C. 
A  mailed  the  draft  to  C,  who  negotiated  it  to 
D,  a  holder  in  due  course.  Bank  B  at  A's 
request  stopped  payment.  Opinion:  D,  the 
holder  in  due  course,  can  enforce  paAinent  of 
the  draft  against  Bank  B,  the  drawer,  free 
from  defenses  available  against  C,  the  pavee. 
Vol.  7,  p.  305,  Xov.,  1914. 

648.  (Iowa.)  A  bank  which  purchases  a 
cashier's  check  from  the  holder,  assuming  it 


82 


HOLIDAYS,  SATURDAY  AND  SUNDAY 


660 


is  properly  indorsed  and  within  a  reasonable 
time  after  its  issue,  can  recover  the  amount 
from  the  issuing  bank  free  from  any  defense 
which  that  bank  may  have  against  the  payee. 
The  innocent  purchaser  of  a  stopped  check 
may  enforce  payment  from  the  drawer.  Vol. 
6,  p.  629,  March,  1914. 

649.  (N.  Dak.)  A  bank  issued  a  draft  and 
afterwards  stopped  payment  because  the 
payee  gave  as  part  payment  a  worthless  check 
of  a  third  person.  Opinion:  The  issuing 
bank  cannot  be  held  liable  by  the  payee  for  so 
much  thereof  as  is  represented  by  the  worth- 


less check;  but  if  the  draft  was  transferred, 
the  bank  would  be  liable  to  a  holder  in  due 
course  for  the  full  amount.  Vol.  5,  p.  447, 
Jan,.  191:^. 

650.  (N.  Y.)  A  customer  deposited  a 
check  and  received  credit  for  the  amount, 
$295  of  which  he  checked  out  before  payment 
of  the  deposited  check  was  stopped.  Opin- 
ion: The  bank  of  deposit  was  a  holder  in  due 
course  to  the  extent  of  the  amount  paid  out 
against  such  deposit,  and  in  this  case  can  re- 
cover $295  from  the  maker  of  the  deposited 
check.     Vol.  5,  p.  25,  July,  1912. 


HOLIDAYS,  SATURDAY  AND  SUNDAY 


Instrument  executed  on  holiday 

651.  (Miss.)  A  document  signed  on  a 
legal  holiday  is  valid  unless  the  act  is  ex- 
pressly prohibited  by  the  statute  creating  the 
holiday.     Vol.  9,  p.  146,  Aug.,  1916. 

652.  (S.  Dak.)  In  South  Dakota  a  check 
or  note  dated  on  Sunday  or  on  a  holiday 
would  in  all  probability  be  held  valid,  al- 
though there  is  no  decision  on  the  point. 
Vol.  6,  p.  758,  May,  1914. 

653.  (Wash.)  In  Washington  a  note 
and  mortgage  executed,  acknowledged  and 
delivered  on  a  legal  holiday  is  not  prohibited 
by  statute  and  is  valid.  Vol.  5,  p.  656,  April, 
1913. 

Instrument  maturing  on  Saturday 

See  660 

654.  (Mo.)  Under  the  Negotiable  In- 
struments Law  of  Missouri  a  negotiable  in- 
strument falling  due  on  Saturday,  other  than 
one  payable  on  demand,  cannot  be  presented 
for  payment  and  protested  until  the  next  suc- 
ceeding business  day.  Vol.  4,  p.  617,  April, 
1912. 

655.  (N.  C.)  Saturday  afternoon  in 
North  Carolina  is  not  a  half  holiday  and  pre- 
sentment and  protest  can  be  made  on  Satur- 
day afternoon  the  same  as  on  the  afternoon  of 
any  other  business  day.  Vol.  1,  p.  204,  Dec, 
1908. 

Note:  In  1019  a  statute  recommended  by  tlic 
American  Bankers  Association  was  passed  provid- 
ing that  the  payment,  certification  or  accei)tance 
of  a  check  or  other  nej^otiahle  instrument,  if  done 
or  performed  on  a  Saturday  afternoon  or  on  a 
legal  lioliday,  is  valid.  In  1007  the  Saturday 
half  holiday  recognized  by  the  Negotiable  Instru- 
ments  Law   was  abolished  by  statute. 

656.  (Pa.)  By  statute  in  Pennsylvania, 
a  note  otherwise  presentable  for  payment  on 
Saturday  is  "payable"  on  the  next  business 
day,  hence  a  bank  owning  a  note  so  payable 


would  be  entitled  to  interest  for  two  added 
days  and  a  renewal  note  should  be  dated 
Monday.     Vol.  7,  p.  38,  July,  1914. 

Note:  In  1917  a  statute  recommended  by  the 
American  Bankers  Association  was  passed,  mak- 
ing the  payment  of  a  negotiable  instrument  on 
a  Saturday  afternoon  valid. 

Notes  executed  and  delivered  on  Sunday 

657.  (N.  Y.)  At  conmion  law  a  note 
executed  and  delivered  on  Smiday  is  valid, 
but  in  many  states  the  courts  have  held  such 
notes  void  by  reason  of  Sunday  statutes.  In 
New  York  the  execution  and  delivery  of  such 
notes  not  being  acts  characterized  as  "serious 
interruptions  of  the  repose  and  religious 
liberty  of  the  community"  would  probably  be 
held  valid.     Vol.  4,  p.  308,  Nov.,  1911. 

658.  (Tex.)  At  common  law,  Sunday 
contracts  are  lawful  and  except  in  those  states 
where,  by  statute,  the  execution  and  delivery 
of  a  note  on  Sunday  is  prohibited,  a  note 
dated  on  Sunday  is  valid.  Texas  has  no  such 
prohibitory  statute.    Vol.  6,  p.  9(i.  Aug..  1 !»!:!. 

Payment  of  check  on  holiday 

659.  (Ala.)  In  tiic  absence  of  judicial 
decision  upon  the  precise  point,  payment  of 
a  check  on  a  holiday  would  be  of  uncertiiin 
validity  and  at  the  risk  of  the  bank,  !?iiould 
the  drawer  stop  payment  at  the  o|)ening  of 
business  on  the  next  l)usiiiess  dav.  Vol.  5, 
p.  829,  June,  1913. 

660.  (111.)  In  Illinois  (1)  Saturday  is 
a  legal  half-holiday  in  cities  of  200,000  or 
more,  and  in  such  cities  paper  maturing  on 
Saturdays  matures  and  is  presentable  and 
protestable  the  following  business  day,  except 
checks  and  other  demand  paper  are  at  the 
holder's  option  presentable  on  Saturday  fore- 
noon and  protestable  the  same  day  (2)  ;  in 
cities  of  under  200,000  Saturday  is  not  a  legal 


83 


661] 


DIGEST  OF  LEGAL  OPINIONS 


half-holiday  except  tliat  tlie  Negotiable  In- 
struments Act  postpones  presentment  of  all 
Saturday  maturing  paper  to  the  following 
business  da}^,  with  like  option  to  the  holder  of 
checks  and  other  demand  ])aper  to  present 
Saturday  forenoon  and  protest  the  same  day. 
Vol.  9,  p.  750,  March,  1917. 

661.  (Kan.)  It  is  unsafe  in  the  present 
condition  of  the  law  for  a  bank  to  pay  a 
check  upon  a  holiday.  Saturday  afternoon 
is  not  a  half-holiday  in  Kansas,  but  in  view 
of  the  Negotiable  Instruments  Law  relating 
to  presentment  for  payment  on  Saturday, 
payment  of  a  check  on  Saturday  afternoon 
except  to  the  drawer  would  be  at  the  risk  of 
the  bank.     Vol.  7,  p.  582,  Feb.,  1915. 

Note:  In  May,  1915,  a  statute  was  passed, 
making  the  payment  of  a  negotiable  instrument 


on  11  Satmdiiy  afternoon  or  upon  any  legal  holi- 
day valid. 

662,  (Ohio.)  In  the  present  condition 
of  the  law  and  in  the  absence  of  direct  judicial 
precedent,  jiayment  of  a  check  on  a  holiday 
or  lialf  lioli(hiy  would  be  of  uncertain  validity 
and  at  the  risk  of  the  bank,  should  the 
drawer  stop  payment  at  the  opening  of  Ijusi- 
ness  on  the  next  business  day.  Vol.  5,  p. 
654,  April,  1913. 

Note:  In  May,  1913,  a  statute  was  passed, 
making  the  payment  of  a  negotiable  instrument 
on  a  Saturday  afternoon,  which  is  by  law  a  half 
holiday,   valid. 

663.  (S.  C.)  In  view  of  the  authorities 
and  in  the  absence  of  a  prohibitory  statute, 
it  would  seem  that  a  bank  in  South  Carolina 
could  safely  pay  a  check  dated  on  Sunday  or 
on  a  holiday.     Vol.  5,  p.  589,  March,  1913. 


HUSBAND  AND  WIFE 


See  Married  \Y 
Authority  to  draw  checks 

664.  (Cal.)  A  depositor  who  authorized 
his  wife  to  draw  against  his  account  died, 
leaving  a  balance  of  less  than  $500.  Opin- 
ion: The  husband's  death  revoked  his  wife's 
authority  to  draw^  checks,  and  also  revoked 
all  his  outstanding  checks;  but  by  a  statute 
in  California,  not  exceeding  $500  of  a  de- 
cedent's deposit  may  be  paid  to  a  surviving  ■ 
wife  or  husband  upon  affidavit.  A"ol.  6,  p. 
578,  Feb.,  1914. 

665.  (La.)  A  man  deposits  $100  to  the 
credit  of  his  wife  and  informs  the  bank  that 
his  wife  has  instructed  him  to  sign  checks. 
The  bank  asks  if  it  would  be  safe  in  relying 
upon  the  husband's  word  without  proof  of 
authority  from  the  wife.  Opinion:  The  bank 
would  not  be  safe  in  paying  the  husband's 
checks  because  if  the  deposit  Avas  her  separate 
property  and  under  her  separate  administra- 
tion, the  husband  would  have  no  right  to 
withdraw  the  deposit,  and  payment  to  him 
where  he  had  not  been  authorized  would  not 
protect  the  bank ;  although  if  the  deposit  was 
community  property  or  constituted  a  portion 
of  her  separate  estate  that  Avas  under  the 
control  and  administration  of  the  Imsband, 
the  latter  would  probably  have  the  right  to 
withdraw  the  deposit  without  authority  of 
the  wife.  The  system  of  community  prop- 
erty prevails  in  some  of  the  Southwestern  and 
Pacific  states,  including  Louisiana  and  Texas. 
Vol.  7,  p.  582,  Feb.,  1915. 

666.  (N.  Y.)  A  check  signed  "John  Doe 
per  Jennie  Doe"  was  presented  to  a  bank, 


omen,  834-843 

which  carried  an  account  for  John  Doe. 
Jennie  Doe  was  John  Doe's  wife  but  no  au- 
thorization to  pay  was  filed  with  the  bank. 
Opinion:  In  the  absence  of  authority  from 
John  Doe,  the  bank  should  not  pay  such 
check.  If  checks  so  signed  are  honored,  the 
husband  can  recover  unless  he  has  authorized 
or  ratified  the  act.     Vol.  5,  p.  245,  Oct.,  1912. 

Husband's  account  in  name  of  wife 

667.  (Pa.)  A  married  man  opened  a 
savings  account  in  the  name  of  his  wife  and 
daughter.  The  husband  and  wife  having  sep- 
arated, both  claim  owmership  and  control  of 
the  amount  deposited.  Opinion:  The  mere 
opening  of  a  savings  account  by  a  husband 
in  the  name  of  his  wife  and  daughter  does 
not  constitute  a  completed  gift  in  tlie  absence 
of  delivery  of  the  pass-book  or  other  evidence 
of  the  deposit  or  of  other  facts  indicating  per- 
fection of  the  gift,  and  so  long  as  the  gift  is 
not  completed  it  may  be  revoked  bv  the  hus- 
band.    Vol.  8,  p.  609,  Jan.,  1916. ' 

Husband's  account  in  trust  for  wife 

668.  (N.  Y.)  ^Yhe^e  a  savings  account  is 
held  by  a  husband  in  trust  for  his  wife  and 
both  perish  in  same  disaster,  no  presumption 
at  common  law^  that  one  survived  the  other, 
but  survivorship  must  be  proved — if  wife  sur- 
vived husband,  her  next  of  kin  entitled  to  de- 
posit, but  if  husband  survived  wife  or  both 
died  simultaneously,  deposit  goes  to  hus- 
band's next  of  kin.  Vol.  5,  p.  593,  March, 
1913. 


8i 


G77 


INDORSER— INDORSEMENT 


Absence  of  payee's  indorsement 

St-e   (iSO,   715,    1132,    11:M 

669.  (Mass.)  A  check  payable  to  two 
persons  was  indorsed  by  one  and  deposited. 
The  bank  stamped  "indorsements  guaran- 
teed" and  the  check  was  paid  by  the  drawee. 
Opinion:  The  indorsement  would  be  held  to 
guarantee  tlie  drawee  against  loss  or  injury 
caused  by  the  absence  of  the  indorsement. 
Assuming  the  transfer  was  without  authority 
of  the  non-indorsing  payee,  the  drawee  could 
recover.     Vol.  4,  p.  300,  Nov.,  1911. 

Indorsement  by  alternative  payee 

670.  (Kan.)  A  bank  issued  a  certificate 
of  deposit  payable  to  the  order  of  John  Smith 
or  Mary  Smith.  The  hank  raises  the  ques- 
tion wliether  such  certificate  requires  the  in- 
dorsement of  both  parties.  Ojnnion:  The 
order  to  pay  is  complete  and  sufficient  upon 
the  indorsement  of  either  pa3'ee.  Vol.  9,  p. 
652,  Feb.,  1917. 

Authority  of  agent  to  indorse 
See  328,  332,  447,  708,  900 

671.  (Ala.)  An  attorney  who  was  em- 
ployed by  a  merchant  to  collect  a  note  payable 
to  said  merchant,  received  from  the  maker  a 
check  covering  the  amount,  which  was  drawn 
in  favor  of  the  merchant.  The  attorney  in- 
dorsed the  check  as  attorney  for  tlie  merchant 
and  then  by  himself  personally  and  deposited 
it  to  his  personal  account  in  his  bank.  He 
later  used  all  the  money  from  his  own  account 
and  moved  away.  The  merchant  seeks  to  re- 
cover from  the  bank.  Opinion:  An  attorney 
employed  to  collect  a  note  has  no  authority, 
solely  by  reason  of  such  employment,  to  in- 
dorse his  client's  name  to  a  check,  payable  to 
such  client,  received  in  collection,  and  the 
drawee  which  pays  such  clieck  upon  such  in- 
dorsement is  responsible  if  the  money  is  mis- 
appropriated, unless  it  can  prove  that  the 
client  authorized  the  attorney  to  so  indorse. 
Vol.  10,  p.  206,  Sept.,  1917. 

672.  (111.)  Where  the  clerk  of  a  depos- 
itor entrusted  with  a  rubber  stamp  containing 
an  indorsement  by  depositor  to  bank,  uses  the 
stamp  upon  checks  of  which  the  depositor  is 
payee  and  receives  the  cash  thereon  from  the 
bank,  which  he  misappropriates,  concealing 
his  crime  for  a  considerable  period  ])ecause  of 
his  function  to  receive  the  monthly  state- 
ments.    Opinion:  The  liability  of  bank  to  de- 


positor depend  upon  whether  (1)  the  clerk 
had  authority  to  collect  as  well  as  to  indorse 
to  the  bank;  (2)  if  without  original  author- 
ity, depositor  has  ratified  his  acts,  or  (3)  de- 
positor has  been  negligent,  and  if  none  of 
above  conditions  e.xist,  the  bank  is  liable. 
Vol.  10,  p.  204,  Sept.,  1917.  _ 

673.  (Me.)  A  employed  B  as  his  agent 
to  collect  his  accounts.  A  check  was  drawn 
payable  to  A,  on  which  B  without  authority 
indorsed  his  principal's  name,  as  well  as  his 
own.  The  drawee,  knowing  that  B  was  the 
agent  of  A,  paid  the  check.  Opinion:  The 
drawee  is  liable  to  the  drawer  for  having  paid 
the  check  upon  the  unauthorized  forged  in- 
dorsement of  the  payee.  B's  authority  to 
collect  accounts  does  not  include  authority  to 
indorse  his  principal's  name  to  checks  payable 
to  the  principal.     Vol.  4,  p.  26,  July,  1911. 

674.  (Md.)  A  bookkeeper  authorized 
to  indorse  checks  for  deposit  to  the  credit  of 
a  firm  has  no  authority  to  indorse  notes  pay- 
able to  his  firm  for  the  i)urpose  of  discount 
and  credit,  and  the  bank  should  require  a 
power  of  attorney.  Vol.  4,  p.  432,  Jan., 
1912. 

675.  (Minn.)  A  check  payable  to  John 
Doe  &  Co.  is  indorsed  to  B  by  an  unauthorized 
agent.  B  indorsed  to  C  and  guaranteed  all 
prior  indorsements  and  C  collected  from  the 
drawee.  Opinion:  The  drawee  bank  can  re- 
cover from  C  as  the  apparent  owner  of  the 
check.     Vol.  4.  p.  3:6,  Dec.,  1911. 

676.  (Mont.)  The  agent  of  a  railroad 
company  deposited  to  his  personal  account 
two  checks  payable  to  the  company  and  in- 
dorsed '"U,  Agent  C  L'aihvay  Co."  Opin- 
ion: In  the  absence  of  exjiress  or  implied  an- 
tliority,  a  railroad  agent  cannot  indorse  checks 
])ayable  to  his  comiJany  and  deposit  them  to 
his  ])ersonal  credit,  and  the  depository  bank 
would  be  liable  if  the  agent  misapplied  the 
funds.     Vol.  6.  p.  2:6,  Oct.,  1913. 

677.  (Neb.)  A  check  payable  to  a  firm 
is  given  to  its  agent  and  cashed  by  a  bank 
upon  the  indorsement  of  the  firm  by  the 
agent.  The  check  is  collected.  Thirty  days 
later  it  turns  out  the  agent  had  no  authority 
to  indorse  and  the  firm  did  not  receive  the 
money.  Opinion:  The  bank  which  cashed 
the  check  is  liable  to  refund  to  the  drawee, 
and  the  elapsing  of  thirty  days  before  the  dis- 
covery does  not  relieve  it  from  liability.  Vol. 
4,  p.  302,  Nov.,  1911. 


85 


678 


DIGEST  OF  LEGAL  OPINIONS 


678.  (Wis.)  A  check  payable  to  a  firm 
was  indorsed  by  the  agent  of  the  firm  witfiout 
authority,  was  cashed  by  a  bank,  and  paid  by 
the  drawee.  Opinion:  The  cashing  bank  wa^ 
lial)le  to  the  drawee  for  a  return  of  the  money, 
irrespective  of  whether  the  indorsement  was 
guaranteed.  The  rule  stated  is  that  money 
paid  under  a  mistake  of  fact  without  consid- 
eration is  recoverable.  Vol.  2,  p.  830,  Dec, 
1909. 

Bearer  checks  do  not  legally  require 
indorsement 

See    288    et    seq 

679.  (La.)  A  check  was  presented  "pay 
to  the  order  of  bearer,  ten  dollars,"  and  a 
bank  refused  to  cash  it  until  the  bearer  in- 
dorsed it.  Opinion :  The  indorsement  cannot 
legally  be  required.  A  check  payable  to 
"order  of  bearer"  is  the  equivalent  of  one  pay- 
able to  bearer.     Vol.  3,  p.  732,  June,  1911. 

680.  (S.  Dak.)  Where  a  check  is  indorsed 
in  blank  by  the  payee  it  is  payable  to  bearer 
and  does  not  require  indorsement  by  each 
successive  holder.  Where  a  check  is  pre- 
sented in  person  by  a  payee  some  courts  hold 
that  he  cannot  be  compelled  to  indorse  as  a 
pre-requisite  of  payment,  others  holding  the 
contrary  view,  which  is  preferred.  Vol.  6, 
p.  755,  May,  1914. 

Blank  indorsement  followed  by  special 
indorsement 

See  288,   726 

681.  (Minn.)  Where  an  indorsement  in 
blank  is  followed  by  a  special  indorsement, 
the  instrument  remained  payable  to  bearer 
under  the  common  law  rule,  but  under  the 
Negotiable  Instruments  Act,  the  question  is 
in  doubt  w^hether  Section  9(5)  deprives  such 
instrument  of  bearer  character,  or  whether 
Sections  34,  35  and  40  apply,  under  which 
the  instrument  would  still  be  payable  to 
bearer.  Where  the  instrument  is  on  its  face 
payable  to  bearer,  a  special  indorsement  does 
not  change  its  character.  Vol.  8,  p.  509, 
Dec,  1915. 

682.  (Mont.)  A  check  was  indorsed  in 
blank  by  the  payee  A  and  given  to  B,  who  in- 
dorsed specially  to  C.  The  check  was  lost 
and  cashed  for  the  finder  by  E  without  C's  in- 
dorsement. Opinion:  Under  the  existing 
condition  of  the  law  it  is  very  doubtful 
whether  E  holds  a  check  payable  to  bearer,  or 
takes  a  good  and  enforceable  title  as  holder 
in  due  course  without  C's  indorsement.  Vol. 
4,  p.  29,  July,  1911. 


683.  (Wash.)  A  note  on  its  face  pay- 
able to  bearer  and  note  payable  to  order  in- 
dorsed in  blank  by  payee  are  both  payable  to 
l)earer  and  negotiable  by  delivery,  Ijut  first 
cannot  while  second  can  be  converted  into 
order  instrument  by  special  indorsement  writ- 
ten over  blank  indorsement.  Whether  special 
indorsement  written  under  blank  indorsement 
converts  paper  into  order  instrument  unde- 
cided and  uncertain.  Vol.  10,  p.  119,  Aug., 
1917. 

Right  to  charge  indorser's  account 

684.  (Pa.)  A  bank  has  the  right  to 
charge  a  dishonored  note  to  the  indorser's  ac- 
count, provided  the  latter's  liability  is  duly 
fixed  by  protest  and  notice.  Vol.  3,  p.  146, 
Sept.,  1910.  See  1203  et  seq.  Set  off 
against  indorser's  account. 

"Credit  account  of  within-named  payee" 

685.  (N.  J.)  A  issues  his  check  to  the 
order  of  B.  B  deposits  it  unindorsed  in  his 
bank,  which  stamps  on  the  back  "deposited 
to  the  credit  of  the  within-named  payee," 
followed  by  the  name  of  the  bank.  A  gen- 
eral discussion  is  requested  of  the  duty  and 
obligation  of  the  drawee  in  cases  of  this 
nature.  Opinion:  The  drawee  is  not  legally 
obliged  to  pay  a  check  unindorsed  by  the 
payee,  even  upon  guaranty  of  the  missing  in- 
dorsement. But  in  general  the  drawee  would 
be  justified  in  paying  upon  guaranty  as  such 
paj^ments  in  the  large  majority  of  cases  would 
facilitate  business.  In  a  minority  of  cases 
vrt-l^e  the  payee  had  no  title,  or  the  check  was 
raised,  or  other  valid  reason  existed,  why  the 
check  would  not  be  chargeable  to  the  drawer's 
account,  the  guaranty  would  protect  the  bank. 
In  special  cases  where  the  drawer  might  desire 
the  personal  indorsement  of  the  payee,  pay- 
ment even  upon  guaranty  should  be  refused. 
Payment  without  guaranty  would  be  at  the 
risk  of  the  bank  in  jurisdictions  where  an  in- 
dorsement for  deposit  is  held  restrictive  and 
to  create  a  mere  agency  to  collect  in,  and  not 
to  confer  title,  upon  the  bank  of  deposit,  for 
a  mere  agent  is  not  responsible  after  turning 
over  the  proceeds.  The  sufficiency  and  effect- 
iveness of  different  forms  of  indorsement  and 
of  guarantv  are  considered  in  Vol.  4,  p.  300. 
Nov.,  19 IL 

686.  (N.  J.)  The  indorsement  of  the 
payee  of  a  check  was  missing  and  the  follow- 
ing indorsement  was  used :  "credited  to  the 
account  of  the  within-named  payee  with  the 
Blank  National   Bank."     Opinion:   For  all 


86 


INDORSEE— INDORSEMENT 


694 


practical  purposes  the  drawee  in  paying  the 
check  would  be  as  safe  as  it  would  where  the 
payee  had  personally  indorsed.  Vol.  2,  p. 
302,  Jan.,  1910.    See  669. 

"For   identification   only" 

687.  (Ark.)  The  payee's  indorsement  of 
a  check  was  forged  and  a  subsequent  holder 
indorsed  the  same  and  procured  cash  from 
the  purchasing  bank  upon  faith  of  an  in- 
dorsement by  a  customer  of  the  bank  "for 
identification  only."  Opinion:  The  indorser 
for  identification  warranted  not  only  that  the 
indorser  was  the  person  he  represented  him- 
self to  be,  but  also  that  he  is  bona  fide  in- 
dorsee with  good  title.  Vol.  6,  p.  503,  Jan., 
1914. 

Form  and  language  of  indorsement 

See  08.3,  686 

688.  (Ark.)  A  check  payable  to  "Mrs. 
M.  E.  Smith"  was  indorsed  "M.  E.  Smith" 
and  cashed  at  a  bank  who  forwarded  the 
same  with  the  indorsement  "all  prior  indorse- 
ments guaranteed."  The  drawee  refused 
payment.  Opinion:  The  indorsement  with- 
out the  prefix  "Mrs."  was  regular  and  valid 
and  drawee  should  have  honored  the  check. 
In  a  case  where  an  indorsement  is  insufficient 
or  irregular  the  drawee  is  not  compelled  to 
pay  the  check  even  upon  a  guaranty,  although 
payment  upon  such  guaranty  is  customary, 
but  is  entitled  to  a  reasonable  opportunity  of 
verifying  the  endorsement  before  making  pay- 
ment.    Vol.  5,  p.  756,  May,  1913. 

689.  (Kan.)  A  check  was  made  payable 
to  "Mrs.  Mary  Osage"  and  indorsed  "Mary 
Osage."  When  presented  to  the  bank  pay- 
ment was  refused  upon  the  claim  that  the  in- 
dorsement v/as  incorrect.  Opinion:  The  in- 
dorsement "Mary  Osage"  was  proper  and 
legal,  and  the  drawee  bank  is  not  justified  in 
refusing  payment  because  of  the  omission  of 
prefix  "Mrs.,"  said  prefix  not  being  part  of 
the  name  of  the  payee,  but  only  a  title.  Vol. 
11,  p.  40,  July,  1918. 

690.  (Pa.)  A  check  drawn  by  D.  Smith, 
payable  to  himself,  was  certified  and  paid  by 
the  drawee,  after  the  same  had  l)oen  j)ri'sentod 
by  the  Blank  National  Bank,  bearing  the  fol- 
lowing indorsement:  "Pay  to  the  order  of  J. 
Hinds,  Attorney,  D.  Smith.  Deposit  to  the 
credit  of  J.  Jones,  Trustee,  J.  Hinds,  Attor- 
ney. Pay  any  bank  or  banker,  Bhink  Nation- 
al Bank."  Opinion:  There  is  a  technical  de- 
fect in  Hind's  indorsement,  which  does  not 
show  that  the  deposit  is  to  be  credited  in  the 
Blank  National   Bank.     The  drawee  would 


probably  be  safer  in  paying  if  the  check  was 
indorsed  for  deposit  in  the  Blank  National 
Bank  to  the  credit  of  Jones,  Trustee.  It 
would  not  l)e  necessary  for  the  Blank  Nation- 
al Bank  to  show  by  its  indorsement  that  the 
deposit  was  properly  credited  as  a  condition 
precedent  to  receiving  payment  of  the  check. 
Vol.  4,  p.  27,  July,  1911.' 

691.  (Pa.)  A  check  was  drawn  to  the 
order  of  "Miss  E.  M.  Taylor"  and  bore  the 
indorsement  of  "E.  M.  Taylor."  Opinion: 
The  indorsement  is  in  the  proper  form,  as  tiie 
prefix  "Miss"  is  not  recognized  in  law  as  a 
part  of  the  payee's  name.  Vol.  2,  p.  233, 
Dec,  1909. 

692.  (Vt.)  Where  a  check  is  payable  to 
and  indorsed  by  "Treasurer,  Congregational 
Church,"  such  indorsement,  while  not  satis- 
factory to  bankers,  assuming  the  indorsement 
is  by  the  authorized  official,  is  legally  suffi- 
cient.    Vol.  7,  p.  1000,  June,  1915.  " 

693.  (Wis.)  The  indorsement  of  a  check 
"Pay  yourselves  or  order"  would  be  construed 
as  an  indorsement  to  the  drawee  and  not  to 
another  holder  to  whom  the  check  wiis  for- 
warded.    Vol.  5,  p.  313,  Nov.,  1912. 

Drawee's  right  to  require  guaranty 

694.  (Ore.)  A  check  is  drawn  by  a  cus- 
tomer on  his  bank  in  Oregon,  payable  to  a 
Brick  and  Tile  Company  of  Newark,  New 
Jersey,  and  by  them  indorsed  to  the  Blank 
National  Bank  of  Newark,  who  in  turn  in- 
dorse with  the  usual  form  "Pay  to  any  bank 
or  l)anker  or  trust  company,  all  prior  indorse- 
ments guaranteed.  Blank  National  Bank." 
Other  indorsements  by  a  national  hank  and 
the  Federal  Reserve  bank,  both  of  New  York, 
and  by  the  Federal  Reserve  bank  of  San  Fran- 
cisco follow,  all  making  their  indorsements 
read  substantially  the  same  as  the  first  in- 
dorsement with  the  exception  that  the  last 
named  indorsement  makes  the  check  jiayablc 
direct  to  tiie  Wells  Fargo  Express  Company, 
guaranteeing  all  previous  indor.'^ements.  The 
local  agents  of  the  Express  Company  indorse 
without  guaranteeing  prior  indorsements  and 
present  the  check  to  the  Oregon  bank  for 
{)ayment.  The  bank  as  a  condition  of  pay- 
ment, requires  the  Expres.'^  Company  to  guar- 
antee prior  indorsements.  Opinion:  The 
Express  Company  appearing  from  the  in- 
dorsements to  1)0  only  an  agent  for  collection, 
the  bank  is  entitled  to  a  guaranty  of  prior 
indorsements  a.s  a  prerequisite  to  making 
payment  and  in  the  absence  of  such  guar- 
anty the  bank  is  justified  in  refusing  pay- 


87 


G95 


DIGEST  OF  LEGAL  OPINIONS 


ment  without  ineurriii^'  rosponsihility  to  llic 
drawer  of  the  check.  Vol.  i),  p.  744,  March, 
1917. 

695.  (Tenn.)  A  check  was  presented  to 
tlic  drawee  hank  by  an  express  company,  an 
agent  for  collection,  which  refused  to  guar- 
antee the  indorsements  on  tlie  check.  The 
drawee  bank  refused  to  pay  the  check  until 
such  guaranty  was  given.  Opinion:  The 
drawee  bank  has  a  right  to  require  such  guar- 
anty as  a  pre-requisite  of  payment,  and  its 
refusal  will  not  subject  it  to  liability  to  the 
drawer  for  dishonoring  his  check.  Vol.  8, 
p.  415,  Nov.,  1915. 

Guaranty  of  defective  indorsement 

See  688 

696.  (111.)  A  check  payable  to  J.  E.  Doe 
was  indorsed  Elmer  Doe  by  mistake;  the  in- 
dorsement was  guaranteed,  and  when  pre- 
sented, payment  of  the  check  was  refused. 
Opinion:  Where  the  indorsement  of  the  payee 
is  defective,  the  drawee  is  not  obliged  to  pay 
upon  the  guaranty  of  the  indorsement.  In 
the  event  the  drawer  withdrew  his  account 
before  the  check  w\as  properly  presented,  the 
loss,  if  any,  would  fall  upon  the  owner  of  the 
check,  who  could  recover  against  the  drawer. 
Vol.  6,  p.  438,  Dec,  1913. 

697.  (N.  J.)  A  check  drawn  payable  to 
"John  Jones"  is  indorsed  "John  Jones  Mill- 
ing Company,"  and  is  indorsed  by  a  bank 
"prior  indorsements  guaranteed,"  and  mailed 
to  the  drawee.  Opinion:  The  draw^ee  can  pay 
if  it  chooses,  relying  upon  the  guaranty.  Due 
diligence  or  courtesy  to  the  sending  bank  do 
not  require  paying  bank  to  return  the  item 
for  proper  indorsement,  as  presumably  the 
item  has  been  forwarded  with  knowledge 
of  the  irregularity,  and  in  the  hope  that  it 
will  be  paid  upon  the  guaranty.  Vol.  5,  p. 
247,  Oct.,  1912. 

698.  (Pa.)  A  check  payable  to  the  "Bor- 
ough of  X"  was  certified  by  a  bank.  The  check 
was  presented  bearing  the  indorsement  of  the 
"Borough  of  X,  by  its  attorney,  John  Smith," 
and  payment  was  refused  because  of  the  im- 
proper indorsement.  The  presenting  bank 
then  stamped  the  check  "Indorsement  guar- 
anteed" stating  that  it  was  satisfied  that  the 
attorney  was  duly  authorized  to  indorse. 
The  Borough  of  X  claimed  that  John  Smith's 
indorsement  was  unauthorized  and  that  he 
misappropriated  the  funds.  Opinion:  The 
presenting  bank  is  liable  on  its  guaranty  to 
the  drawee  who  paid  on  faith  of  such  guar- 


anty, which  covers  the  capacity  of  John  Smith 
to  indorse.     Vol.  3,  p.  203,  Oct.,  1910. 

Indorser  discharged  by  payment 

699.  (Iowa.)  An  agent  located  at  S.,  of 
a  grain  company  at  D.,  drew  a  draft  on  the 
grain  company  payable  at  a  bank  at  S.  The 
company  kept  no  checking  account  with  the 
bank,  but  the  latter  cashed  the  draft  on  the 
indorsement  of  the  l)ayee,  and  attaciied  its 
own  sight  draft  on  the  company  for  reim- 
bursement. Opinion:  The  payment  of  such 
draft  by  the  bank  was  not  a  purchase,  but 
was  a  discharge  of  the  draft  and  of  the  in- 
dorser thereon,  so  that  there  would  be  no 
recourse  upon  such  indorser  in  the  event  the 
company  failed  to  take  up  the  draft.  Vol.  7, 
D.  221,  Oct.,  1914. 

Indorser  as  guarantor 

See  966,   1005 

700.  (Pa.)  Persons  other  than  the  payee 
indorsing  on  a  note  "for  value  received  we 
hereby  guarantee  payment  of  the  within  note" 
are  liable  as  guarantors  and  not  as  indorsers. 
It  would  be  preferable  to  have  such  persons 
indorse  "for  value  received  we  hereby  guar- 
antee prompt  payment  of  the  within  note  at 
maturity"  in  order  to  hold  them  liable  as 
sureties.     Vol.  5,  p.  172,  Sept.,  1912. 

Indorser's  liability  preserved  by  demand 
and  notice 

See  1109 

701.  (Kan.)  A  indorsed  in  blank  a  note 
payable  to  a  bank  without  the  words  "protest 
waived  and  payment  guaranteed."  Opinion : 
A  is  liable  to  payee  as  indorser.  Demand  and 
notice  (but  not  formal  protest,  which  is  nec- 
essary only  in  case  of  a  foreign  bill  of  ex- 
change) are  necessary  to  preserve  the  indorse- 
er's  liability.     Vol.  5,  p.  520,  Feb.,  1913. 

702.  (Pa.)  A  note  was  made  payable  at 
and  held  by  a  bank.  The  indorser  was  not 
notified  of  the  non-payment  of  the  note  at 
maturity.  Opinion:  Demand  and  notice  of 
dishonor  are  necessary  to  preserve  the  in- 
dorser's liability  unless  waived.  In  the  pre- 
sent case  the  holding  of  the  note  at  maturity 
by  the  bank  was  sufficient  demand,  but  the 
omission  to  notify  the  indorser  discharged 
him  from  liabilitv.  A'ol.  7,  p.  307,  Nov., 
1914. 

Indorsement  before  payee 

703.  (Md.)  A  made  his  note  payable  to 
C  for  $1,000.     B  indorsed  the  note  before  the 


88 


INDORSEE— INDORSEMENT 


712 


payee.  Opinion:  Under  the  Negotiable  In- 
struments Law  in  force  in  Maryland,  B's  con- 
tract and  liability  is  that  of  an  indorser.  Vol. 
1,  p.  267,  Jan.,  1909. 

704.  (N.  J.)  One  indorsing  before  the 
payee  is  liable  as  an  indorser  under  the  Nego- 
tiable Instruments  Law.  Vol.  2,  p.  233. 
Dec,  1909.     See  701. 

Indorsement  by  mark 

705.  (N,  M.)  A  bank  issued  a  cashier's 
check,  which  the  payee  indorsed  to  the  holder 
by  his  mark,  witnessed  by  two  reputable  per- 
sons. The  issuing  bank  refused  to  pay  the 
check  on  the  ground  that  the  payee  could 
write.  Opinion:  The  bank  should  pay.  An 
indorsement  b}^  mark  of  a  negotialile  instru- 
ment is  valid  and  title  is  transferred  tliereby, 
even  though  the  marksman  can  write.  A"ol. 
9,  p.  237,  Sept.,  191G. 

706.  (Term.)  Where  the  payee  of  a  check 
indorses  by  mark  and  his  signature  is  wit- 
nessed, the  witness'  signature  can  be  looked 
upon  as  a  warranty  of  the  genuineness  of  the 
payee's  indorsement,  the  same  as  a  subsequent 
indorser  warrants  the  genuineness  of  the  sig- 
nature of  each  prior  indorser.  Vol.  1,  p.  407, 
May,  1909. 

707.  (Wyo.)  A  check  was  presented  for 
payment  containing  as  the  payee's  indorse- 
ment an  unwitnessed  mark.  In  the  absence 
of  an  express  guaranty  of  the  indorsement  the 
drawee  bank  may  safely  pay  to  a  responsible 
owner  who  would  be  liable  to  refund  if  the 
indorsemcTit  was  forged  or  unauthorized.  Vol. 
6,  p.  376,  Nov.,  1913. 

Indorsement  by  partnership 

See  487,  488 

708.  (N.  Y.)  Where  a  check  payable  to 
A  and  B,  who  are  not  partners,  is  indorsed 
*'A  and  B  per  A"  and  is  ofTered  for  deposit 
to  the  credit  of  A's  personal  account,  the  bank 
before  accepting  the  deposit  sliould  be  satis- 
fied tiiat  B  has  authorized  A  to  make  such  in- 
dorsement. Where  A  and  B  are  partners  the 
general  rule  is  that  in  the  case  of  a  trading  or 
commercial  firm,  any  member  has  implied  au- 
thority to  indorse  and  transfer  paper  by  in- 
dorsement in  the  firm  name,  and  such  trans- 
fer may  be  made  to  himself.  Such  authority 
is  not  implied  in  the  case  of  a  non-trading 
firm.     Vol.  5,  p.  310,  Nov.,  1912. 

"Pay  any  bank  or  banker" 
See  574 

709.  (Ga.)  A  drew  a  check  payable  to 
himself,  which  he  indorsed  and  deposited  for 


collection  in  the  L  bank.  Before  collection 
and  at  A's  request  the  check  was  returned  to 
him  with  the  bank's  uncancelled  indorsement, 
*'pay  any  bank  or  banker,  prior  indorsements 
guaranteed."  A  merchant,  relying  on  this 
indorsement,  cashed  the  check  for  value  and 
deposited  it  for  collection  in  the  J  bank.  The 
check  is  returned  to  J  bank  unpaid,  and  un- 
protested. Opinion :  The  L  bank  is  not  liable 
to  the  merchant  on  its  indorsement,  under 
which  the  merchant  took  no  title.  The  J 
bank  is  not  liable  to  tlie  merchant  for  negli- 
gence as  protest  in  this  case  was  unnecessary 
to  charge  the  indorser.  The  form  of  in- 
dorsement in  this  case  is  generally  held  to  be 
agent-creating  and  not  title-conveving.  Vol. 
4^  p.  754,  June,  1912. 

710.  (Pa.)  A  check  payable  to  John 
Doe  &  Co.  was  indorsed  "John  Doe  &  Co., 
James  Roe,  Treasurer,  per  G.,"  and  it  was 
stamped  "pay  to  the  order  of  any  bank,  etc., 
prior  indorsements  guaranteed,"  Ijy  the  City 
Trust  Company.  Opinion:  The  indorsement 
by  the  City  Trust  Company  which  is  tlie  cus- 
tomary bank  indorsement,  was  a  sufficient 
guaranty  of  the  genuineness  and  validity  of 
the  prior  indorsement,  and  would  protect  the 
paying  bank  in  event  the  payee's  indorsement 
was  unauthorized.  Vol.  3,  p.  468,  Feb., 
1911. 

Indorsement  by  precise  person  intended 
See  585,  591  ct  scq 

711.  (Ark.)  The  drawer  of  a  clieck  pay- 
able to  the  order  of  C.  E.  Spencer  mailed  the 
same  to  the  payee  named,  but  intended  to 
pay  J.  W.  Spencer.  The  check  was  indorsed 
by  C.  K.  Spencer,  and  negotiated  to  Jones, 
who  also  indorsed  it.  Later  the  check  was 
paid.  Jones  has  disappeared.  The  bank 
questions  its  liability.  Opinion:  Payment  by 
the  drawee  on  the  indorsement  of  C.  E.  Spen- 
cer was  good  and  chargeable,  as  it  was  tlic 
drawer's  own  fault  tiiat  the  person  intended 
did  not  receive  the  money.  Vol.  8,  p.  416, 
Nov.,  1915. 

712.  (Miss.)  Wiiore  a  check  is  made 
payable  to  "John  Smith,  Tax  Collector," 
after  Smith  has  ceased  to  hold  that  oflTice.  and 
is  negotiated  by  indorsement  of  the  payee  to 
a  bank  which  guarantees  prior  indorsements 
and  receives  payment.  Opinion:  The  l)ank 
receiving  payment  is  a  holder  in  due  course 
and  not  lial)le  to  refund,  for  the  indorsement 
is  by  the  precise  payee  intended  ;  there  is  no 
l)reach  of  the  guaranty  of  genuineness,  and 
the  suffix  "tax  collector"  is  descriptio  pcrsonae 


89 


713 


DKiKST  OF  ].EGAL  OPINIONS 


and  does  not  put  the  indorsee  upon  iiuiuiry. 
Vol.  y,  p.  984,  June,  1917. 

Indorsement  as  pre-requisite  of  payment 
See  201,  292,   079,  «80 

713.  (Cal.)  A  chock  lacking  the  in- 
dorsement of  ilie  payee,  but  indorsed  in  blank 
l)y  the  drawer,  is  not  payable  to  bearer.  It 
is  not  safe  for  a  hank  to  ])ay  to  tlie  holder 
without  express  instructions  from  the  drawer. 
Vol.  4,  p.  430,  Jan.,  1912. 

714.  (111.)  T)  drew  a  check  on  the  X 
hank,  payable  to  P  or  order,  and  P  presented 
the  check  direct  to  the  X  bank  for  payment. 
P  refused  to  indorse  the  check.  Opinion: 
The  majority  of  courts  would  he  likely  to  up- 
hold the  rule  established  by  custom  that  the 
X  bank  may  refuse  payment  if  the  payee  de- 
clines to  indorse.  At  common  law,  however, 
the  debtor  could  not  require  a  receipt  as  a 
condition  of  payment,  and  it  has  heen  held  in 
some  cases  that  a  bank  cannot  require  the 
payee's  indorsement  where  the  payee  presents 
the  check  in  person.  The  insertion  in  the 
check  of  "order  of  P,"  instead  of  "P  or 
order,"  would  not  make  any  difference,  as 
there  is  no  legal  distinction  between  the  two 
phrases.     Vol.  5,  p.  521,  Feb.,  1913. 

715.  (Miss.)  A  check  is  indorsed  by  the 
payee  to  J.  J.  Taylor,  who  cashed  it  without 
indorsement  with  a  merchant.  The  merchant 
forwarded  the  item  for  credit  to  his  account. 
The  drawee  refused  to  pay  or  to  give  credit. 
Opinion :  The  drawee  is  not  obliged  to  pay  or 
give  credit  for  a  check  Avhere  a  necessary  in- 
dorsement is  lacking.  Vol.  5,  p.  23,  July, 
1912.     See  669. 

716.  (Ore.)  A  made  his  check  payable 
to  B  for  $50  and  indorsed  it  in  blank.  B 
presented  it  in  person  to  the  drawee  without 
indorsing  it.  Opinion:  Some  courts  hold 
the  payee  need  not  indorse  when  he  presents 
the  check  in  person,  while  others  uphold  the 
right  of  the  bank  to  require  the  indorsement. 
It  is  customary  to  require  the  payee's  indorse- 
ment as  evidence  that  he  has  received  pay- 
ment, and  this  requirement  is  none  the  less 
necessary  because  the  drawer  has  indorsed 
the  check  in  blank.  Vol.  7,  p.  897,  May, 
1915. 

717.  (Pa.)  A  check  was  drawn  payable 
"to  the  order  of  John  Jones,"  and  signed 
"S.  A.  Smith."  It  was  not  indorsed  by  the 
payee,  but  was  indorsed  in  blank  by  the 
drawer  "S.  A.  Smith."  Opinion:  The  check 
is  not  payable  to  bearer.     Bank  should  refuse 


payment   until    properly    indorsed.     Vol.    1, 
\).  268,  Jan.,  1909. 

"Prior  indorsements  guaranteed" 

718.  (Ala.)  A  gave  to  B  his  check  which 
bore  the  genuine  indorsement  in  blank  of  B 
and  was  deposited  by  C,  a  transferee,  without 
the  latter's  indorsement.  The  bank  guar- 
anteed tlie  prior  indorsements  and  collected 
from  the  drawee.  The  payee  obtained  the 
check  from  the  maker  by  fraud.  Opinion: 
The  guaranty  of  prior  indorsements  would 
not  make  the  collecting  bank  liable.  The  in- 
dorsement does  not  warrant  that  the  payee  is 
free  from  fraud.  Vol.  4,  p.  550,  March, 
1912. 

719.  (Kan.)  A  check  payable  to  Mrs. 
John  Doc  is  indorsed  without  authority 
"Mi-s.  John  Doe  by  John  Doe,"  and  the  bank 
which  cashed  the  item  indorsed  "all  prior  in- 
dorsements guaranteed."  The  drawee  bank 
paid  the  check  and  Mrs.  Doe  did  not  receive 
the  money.  Opinion:  "All  prior  indorse- 
ments guaranteed"  warrants  genuineness  of 
the  payee's  indorsement,  not  only  where  the 
name  of  the  payee  is  forged,  but  also  where 
the  payee's  name  is  signed  without  authority 
by  another.     Vol.  4,  p.  679,  May,  1912  . 

720.  (N.  Y.)  A  check  is  presented  pay- 
able to  A  and  bearing  the  indorsement  of  "A 
by  B."  It  is  also  indorsed  by  the  presenting 
bank  "all  prior  indorsements  guaranteed." 
Opinion:  The  drawee  is  safe  in  paying  the 
check.  "All  prior  indorsements  guaranteed" 
warrants  the  genuineness  of  payee's  indorse- 
ment, not  only  where  the  name  of  payee  is 
forged  but  also  where  payee's  name  is  signed 
without  authority.  Vol.  5,  j).  174,  Sept., 
1912. 

721.  (Okla.)  A  cashier's  check  payable 
to  John  Jones  was  indorsed  "John  Jones  by 
James  White"  and  later  indorsed  by  a  bank 
"all  prior  indorsements  guaranteed."  The 
check  was  paid  and  it  developed  that  John 
Jones  did  not  receive  the  money.  Opinion: 
The  indorsement  "all  prior  indorsements 
guaranteed"  covers  the  sufficiency  of  the  in- 
dorsement "John  Jones  bv  James  White." 
Vol.  4,  p.  432,  Jan.,  1912. 

722.  (Okla.)  A  drawee  bank  paid  a 
check  upon  which  an  indorsement  was  forged. 
Two  banks  had  subsequently  indorsed  with 
the  words  "previous  indorsements  guaran- 
teed." Opinion:  The  words  "previous  in- 
dorsements guaranteed"  are  an  express  guar- 
anty of  the  validity  of  prior  indorsements 
and  the  bank  which  pays  a  check  bearing  a 


90 


INDOESER— INDOESEMEXT 


730 


prior  forged  indorsement  may  recover  of  the 
guarantor.     Vol.  3,  p.  520,  March,  1911. 

723.  (W.  Va.)  The  stamp  ''prior  in- 
dorsements guaranteed"  guarantees  the  gen- 
uineness of  prior  indorsements,  and  covers 
imperfections  and  irregularities  therein.  Vol. 
1,  p.  407,  May,  1909. 

724.  (Wis.)  A  certificate  of  deposit 
payable  to  John  Jones  bore  the  indorsement 
of  "John  Jones  by  Mary  Jones."  The  col- 
lecting bank  indorsed  it  "all  prior  indorse- 
ments guaranteed."  Opinion:  The  payor 
would  be  protected  in  paying,  as  the  guaranty 
by  the  collecting  bank  is  suflicient  to  cover 
the  authority  of  Mary  Jones  to  indorse.  Vol. 
G,  p.  212,  Sept.,  1913. 

Restrictive  indorsement 

See  574,  685 

725  (Cal.)  A  four  months'  sight  draft 
after  acceptance  by  the  drawee  is  held  by 
the  collecting  bank  of  Y,  to  whom  it  was 
transferred  by  an  unqualified  indorsement. 
The  drawee  desires  to  discount  the  draft  be- 
fore maturity  and  the  collecting  bank  seeks 
advice  as  to  the  proper  form  of  indorsement. 
to  be  made  by  it  to  the  drawee  to  protect  it- 
self against  any  fraudulent  transfer  to  a 
holder  in  due  course.  0 pinion.:  The  in- 
dorsement "pay  bank  of  X  only"  is  a  form 
which  would  transfer  title  and  restrict  the 
further  negotiablitv  of  the  instrument.  Vol. 
9,  p.  984,  June,  1917. 

726.  (N.  J.)  A  check  drawn  to  the  order 
of  bearer  is  deposited  in  a  bank,  indorsed  by 
the  depositor,  and  is  indorsed  by  the  bank 
to  its  New  York  correspondent.  The  check 
is  lost  and  later  is  cashed  by  another  bank. 
Opinion:  The  bank  whieli  cashed  the  check 
is  protected.  Where  an  instrument  is  payable 
to  bearer  and  is  indorsed  specially,  it  may. 
nevertheless,  be  further  negotiated  by  deliv- 
ery; but  the  person  indorsing  specially  is 
liable  as  indorser  to  only  such  holders  as  make 
title  through  his  indorsement.  Vol.  7,  p. 
690,  March,  1915.  See  681  et  seq.  Blank 
indorsement  followed  by  special  indorsement. 

727.  (N.  Y.)  A  note  payable  to  the  X 
Manufacturing  Company  was  indorsed  by  the 
payee  as  follows:  "Pay  to  the  order  of  A  for 
collection  on  account  of  the  X  Atfg.  Co.,  X 
Treasurer."  B,  the  indorsee  of  A,  presented 
the  note  to  a  bank  for  discount.  Opinion: 
The  bank  should  not  discount  the  note.  The 
indorsement  is  restrictive  and  conveys  no 
right  to  the  holder  to  negotiate  the  instru- 
ment.    Vol.  7,  p.  168,  Sept.,  1914. 


728.  (N.  C.)  John  Smith  drew  a  draft 
on  the  Brown  Manufacturing  Company  for 
$40,  payable  to  the  X  Bank.  The  draft  was 
cashed  ffjp-  Smith  by  tlie  X  Bank  but  only 
upon  the  indorsement  of  John  Jones,  to  whom 
Smith  was  known.  Afterwards  Jones  becom- 
ing suspicious  of  Smith  had  him  refund  to 
the  bank.  The  draft  was  returned  to  Smith, 
but  tlirough  error  it  contained  uncancelled  in- 
dorsements of  the  X  Bank  "Pay  to  the  order 
of  any  bank,  etc.,"  and  also  of  John  Jonc& 
Smith  succeeded  in  cashing  the  check  at  the 
Y  Bank,  who  regarded  the  indorsement  of 
the  X  Bank  as  a  virtual  certification.  The 
draft  having  been  dishonored  by  the  Brown 
Manufacturing  Company,  the  Y  bank  now 
seeks  to  hold  the  X  bank  and  John  Jones 
liable.  Opinion:  The  indorsement  placed 
upon  the  draft  by  the  payee,  the  X  Bank, 
was  restrictive.  It  did  not  purport  to  pass 
any  title  to  the  draft,  but  was  simply  an 
authority  to  any  bank  to  collect  it.  'I'iie  re- 
strictive indorsement  being  first  upon  the 
draft,  Jones,  whose  name  appeared  under 
that  of  Smith,  could  at  most  be  regarded 
only  as  a  successive  agent  to  collect  with  no 
authority  to  negotiate.  Vol.  1,  p.  445,  June, 
1909. 

729.  (S.  C.)  A  check  payable  to  John 
Doe  was  indorsed  by  the  payee  "indorsed  only 
for  exchange  of  draft  to  the  order  of  John 
Doe."  The  check  was  cashed  and  forwarded 
for  collection,  with  the  usual  indorsement 
guaranty.  Opinion:  The  drawee  bank  was 
safe  in  paying  check  so  indorsed,  es[)ecially 
where  the  indorsement  was  guaranteed.  The 
indorsement  is  more  likely  a  conditional 
rather  than  a  restrictive  one.  The  signature 
of  the  payee,  John  Doe,  in  the  indorsement 
is  sufliciently  made  without  further  subscrib- 
ing his  name,     ^'ol.  6,  p.  821,  June,  1914. 

730.  (Wyo.)  The  weight  of  authority 
is  to  tlie  ellVet  that  an  indorsement  "for  de- 
posit to  the  credit  of"  the  depositor  is  re- 
strictive. Cnder  Section  37  of  the  Nego- 
tiable Instruments  Act  "a  restrictive  indorse- 
ment confers  upon  the  indorsee  the  right  (1) 
to  receive  payment  of  the  instrument,  (2)  to 
bring  any  action  tliereon  that  the  indorser 
could  bring,  (3)  to  transfor  his  right.«  as 
such  indorsee,  where  the  form  of  the  instru- 
ment authorizes  him  to  do  so."  \  bank  of 
deposit  should  have  no  particular  objection 
to  an  indorsement  "for  deposit"  except  that 
under  the  rules  of  certain  Clearing  Houses 
such  indorsement^!  are  declared  to  be  restric- 
tive and  tlie  instrument  not  payable  through 


91 


731 


DIGEST  OF  LEGAL  OPINIONS 


the  Clearing  House  unless  prior  indorsements 
are  guaranteed.     Vol.  8,  p.  325,  Oct.,  1915. 

Rubber  stamp 
See  523 

731.  (Cal.)  A  check  payahle  to  John 
Doe  is  indorsed  l)y  a  ru])hcr  stamp  as  follows: 
"For  deposit  with  the  Blank  National  Bank 
of  Blank  to  the  credit  of  John  Doe."  Opin- 
ion: The  rubber  stamp  indorsement  is  valid 
except  in  localities  where  Clearing  House 
rules  forbid  the  form  of  indorsement  "for 
deposit."  For  all  practical  purposes  the  in- 
dorsement *'for  deposit"  by  a  rubber  stamp  is 
as  good  a  receipt  to  the  drawer  as  a  hand 
written  indorsement.  Vol.  3,  p.  81,  Aug., 
1910. 

732.  (N.  Y.)  A  check  drawn  on  a  na- 
tional bank  was  indorsed  by  rubber  stamp  in 
blank  by  the  payee  and  deposited  in  his  bank, 
which  forwarded  it  to  the  national  bank  with 
the  usual  stamp  guaranteeing  prior  indorse- 
ments. The  national  bank  returned  the 
check  with  the  following  printed  slip  at- 
tached: "This  check  is  returned  for  indorse- 
ment of  the  payee.  A  plain  stamp  indorse- 
ment without  'For  Deposit,'  or  'For  Credit/ 
is  no  indorsement  whatever.  This  bank  will 
refuse  payment  on  all  checks  bearing  this 
kind  of  indorsement  whether  'guaranteed'  or 
not.'*  Opinion:  A  rubber  stamp  indorse- 
ment in  blank  of  the  payee's  name  to  a  check 
is  legal  and  where  the  check  is  deposited  in 
tlie  payee's  bank,  the  drawee  bank  is  protected 
by  such  guaranty  in  making  payment  equally 
as  if  the  words  "for  deposit"  or  "for  credit" 
are  prefixed  to  the  indorsement.  Of  course 
a  drawee  bank  is  not  under  obligation  to 
honor  a  check  presented  by  an  indorsee  unless 
properly  indorsed  by  the  payee,  but  if  the 
payee  imprints  or  authorizes  the  imprint  of 
his  indorsement  by  rubber  stamp,  the  courts 
have  held  such  indorsement  to  be  legal.  Vol. 
11,  p.  331,  Dec,  1918. 

733.  (N.  Y.)  A  note  made  payable  by 
John  Jones  to  John  Brown,  bearing  the 
rubber  stamp  indorsement  of  the  payee's 
name  was  discounted  at  a  bank  and  the  pro- 
ceeds placed  to  the  credit  of  Brown's  account. 
The  proceeds  were  afterwards  embezzled  by  a 
party  holding  a  power  to  sign  checks  against 
such  account.  Brown  claimed  that  the  in- 
dorsement was  unauthorized  and  unratified. 
Opinion:  Indorsement  of  name  of  payee  of 
note  with  rubber  stamp  conveys  good  title  if 
placed  on  note  by  one  having  authority  and 
with  intent  to  indorse,  but  if  indorsement  is 


unauthorized  and  not  ratified  no  title  passes. 
Vol.  4,  p.  753,  June,  1912. 

734.  (Pa.)  An  indorsement  by  a  rubber 
stamp  is  legal,  but  in  some  cases  it  would  be 
more  difficult  to  prove  its  authenticity  than  if 
handwritten.     Vol.  5,  p.  374,  Dec.,  1912. 

735.  (Wis.)  A  bank  has  several  custom- 
ers who  cash  payroll  checks  and  indorse  them 
by  rubber  stamp.  The  bank  receiving  such 
checks  asks  if  it  could  hold  the  customer  liable 
if  checks  were  not  good,  and  what  would  be 
its  status  if  the  customer  received  cash  but 
later  claimed  that  he  did  not  get  the  money 
on  the  ground  that  the  checks  had  been  stolen 
and  the  stamp  placed  thereon  without  his  au- 
thority? Opinion:  An  indorsement  by  a 
rubber  stamp  is  valid  when  made  by  the  payee 
or  indorsee  or  by  one  having  authority  from 
him,  and  may  be  relied  upon  by  a  bank  when 
the  amount  of  the  instrument  is  credited  to 
the  account  of  the  indorser.  But  where  cash, 
instead  of  credit  to  account,  is  requested  upon 
an  instrument  so  indorsed  by  a  customer,  the 
bank,  if  afterwards  confronted  with  the  claim 
that  the  instrument  was  stolen  from  the  in- 
dorser, the  stamp  placed  thereon  without  his 
authority  and  that-  he  had  not  received  the 
amount,  would  be  at  a  disadvantage  in  dis- 
proving such  claim.  The  safer  practice, 
whether  the  indorsement  of  a  customer  is 
handwritten  or  by  rubber  stamp,  is  to  place 
the  amount  to  his  credit  and  require  his  own 
check  in  withdrawal.  Vol.  10,  p.  659,  March, 
1918. 

736.  (Wis.)  A  corporation  discounted 
a  trade  note,  indorsing  the  same  with  its 
rubber  stamp  without  the  written  signature 
of  an  authorized  official.  Opinion:  The  in- 
dorsement is  valid  and  effectual  to  transfer 
title,  but  good  banking  practice  requires  in 
addition  the  written  signature  of  an  author- 
ized official,  as  better  evidence  of  authenticity. 
Vol.  3,  p.  467,  Feb.,  1911. 

Indorsement  does  not  warrant  genuine- 
ness of  signature 

737.  (N.  Y.)  A  bank  is  the  drawee  of 
a  draft  drawn  by  the  executor  of  the  estate 
of  its  deceased  depositor  for  the  balance  to  the 
credit  of  his  account.  The  draft  is  accom- 
panied by  a  certified  copy  of  letters  testament- 
ary showing  right  of  the  executor  to  with- 
draw, as  well  as  the  necessary  waiver,  but  the 
executor  himself  has  never  filed  his  signature, 
so  that  the  bank  has  no  means  of  determining 
whether  his  signature  is  genuine  or  not.  The 
drawee  asks  for  a  guaranty  of  genuineness  of 


92 


INDORSEI^-INDORSEMENT 


r44 


this  signature  before  making  payment,  but 
the  bank  to  whom  the  draft  is  made  payable 
contends  that  such  guaranty  is  unnecessary, 
as  its  indorsement  guarantees  the  genuineness 
of  the  instrument  in  every  respect,  including 
the  maker's  signature.  Opinion:  An  in- 
dorsement of  a  check  signed  by  an  executor 
is  not  a  warranty  to  the  drawee  of  the  gen- 
uineness of  the  drawer's  signature,  but  where 
the  indorsing  bank  is  the  payee  of  the  check, 
and  receives  payment  thereof  from  the 
drawee,  it  would  be  liable  to  refund,  should 
the  drawer's  signature  be  non-genuine,  be- 
cause of  having  received  money  to  which  it 
was  not  entitled,  although  it  made  no  express 
warranty  of  genuineness,  and  in  such  case  the 
rule  holding  the  drawee  bound  to  know  the 
drawer's  signature  and  precluding  recovery 
from  a  bona  fide  holder  would  not  apply. 
Vol.  11,  p'.  673,  June,  1919.  See  556,  560, 
612. 

"Without  recourse" 

738.  (Kan.)  A  gave  his  note  for  $5,000 
to  a  cattle  company,  secured  by  a  chattel 
mortgage  on  certain  cattle.  The  cattle  com- 
pany indorsed  the  note  "without  recourse" 
and  sold  the  note  and  mortgage  to  a  bank. 
The  note  and  the  mortgage  proved  fraudu- 
lent, there  being  no  such  cattle  as  described  in 
the  mortgage.  Opinion:  The  cattle  company 
is  liable  to  the  bank,  as  tlierc  was  a  breach  of 
implied  warranty  of  the  validity  of  the  tiling 
sold.     Vol.  9,  p.  47,  July,  1916. 

739.  (Mich.)  An  indorsement  "without 
recourse"  does  not  relieve  the  indorscr  from 
responsibility  in  case  the  note  is  a  forgery. 
By  this  indorsement,  the  indorser  warrants 
that  the  instrument  is  genuine  and  in  all  re- 
spects what  it  purports  to  be.  Vol.  4,  p.  434, 
Jan.,  1912. 

740.  (Okla.)  B  gave  his  note  to  A, 
which  A  indorsed  to  a  bank  "without  re- 
course," receiving  credit  in  liis  account.  B 
refused  to  pay  the  note  at  maturity,  claiming 
that  A  obtained  the  note  through  fraud. 
Opinion:  The  bank  can  enforce  payment  from 
B,  provided  the  proceeds  of  the  note  have  been 
checked  out  before  tlie  notice  of  fraud.  The 
indorsement  "without  recourse"  does  not 
affect  the  bank's  status  as  a  holder  in  due 
course.     Vol.  5,  p.  830,  June,  1913. 

741.  (Pa.)  A  gave  his  note  to  B,  who 
indorsed  it  over  to  C  without  recourse.    Pay- 


ment was  refused  by  A  because  B  failed  to 
give  value  for  the  note.  Opinion:  A  is  liable 
to  C  if  the  latter  is  a  holder  in  due  course,  and 
the  mere  fact  that  B  indorsed  without  re- 
course does  not  constitute  notice  of  B's  defec- 
tive title.     Vol.  2,  p.  230,  Dec,  1909. 

742.  (Wis.)  Where  a  note  is  indorsed 
in  blank  by  the  payee  with  the  words  "with- 
out recourse"  written  over  his  signature,  and 
is  later  indorsed  by  a  second  indorser,  such 
words  qualify  the  payee's  indorsement  only, 
and  do  not  apply  to  the  second  indorser,  who 
failed  to  insert  the  words.  Vol.  4,  p.  621, 
April,  1912. 

Indorsement  by  person  of  same  name  as 

payee 

See  585  et  scq 

743.  (N.  C.)  Two  checks  were  issued 
and  fell  into  the  hands  of  a  person  of  the 
same  name  as  the  payee,  but  not  the  real 
payee.  One  of  these  checks  was  paid  by  the 
drawee  bank.  Payment  was  stopped  upon 
the  other  check,  but  not  before  tlie  same  had 
been  cashed  by  a  bank  for  the  purported  payee 
upon  tlie  identification  of  a  responsible  per- 
son, who,  liowever,  did  not  indorse  the  check. 
Who  stands  the  loss?  Opinion:  Where  a 
bank  pays  a  clieck  upon  the  indorsement  of  a 
person  of  the  same  name,  but  not  tlie  true 
payee,  the  bank  cannot  charge  the  amount  to 
the  drawer's  account,  unless  the  latter  is  neg- 
ligent, for  the  indorsement  of  the  purjiorted 
payee  is  a  forgery  and  confers  no  authority 
on  the  bank  to  make  payment.  The  payor 
bank,  however,  has  a  right  of  action  against 
the  person  receiving  payment  to  recover  the 
money  as  paid  by  mistake.  A  bank  purchas- 
ing a  clieck  upon  which  the  payee's  indor.se- 
ment  is  forged  as  al)ovo  indicated  ac<iuiro.'^  no 
enforceable  rights;.  Vol.  10,  p.  658,  March, 
1918. 

744.  (S.  C.)  The  drawer  of  a  check, 
who  owed  "(tcorge  P.  Bent,"  by  mistake  drew 
and  mailed  his  check  to  "George  A.  Bent." 
The  latter  received  and  cashed  the  check. 
Opinion:  The  general  rule  is  that  indorse- 
ment by  a  person  of  the  same  name,  or  nearly 
the  same  name,  is  a  forgery  and  that  the  de- 
positor is  not  liable  for  payment.  In  this 
case,  which  is  an  exception  to  the  rule,  the 
maker  is  loser,  as  payment  was  made  by  the 
bank  as  a  result  of  liis  negligence.  Vol.  4, 
p.  303,  Nov.,  1911. 


93 


745 


INTEREST  AND  USURY 


Attorney's  fee  as  cover  for  usury 

745.  (Okla.)  A  national  bank  loaned  B 
$10U  for  ninety  days  and  charged  $0  interest, 
making  the  note  $10G.  The  note  also  pro- 
vided for  the  payment  of  an  attorney's  fee  of 
$15  and  ten  per  cent,  additional.  Opinion: 
Id  this  case  usurious  interest  was  charged  but 
not  paid.  Under  the  National  Bank  Act  the 
entire  interest  is  forfeited  and  the  principal 
alone  is  recoverable.  The  usurious  element 
does  not  vitiate  the  entire  contract,  but  the 
provision  for  the  attorney's  fee  might  be  re- 
garded as  excessive  and  as  a  cover  for  usury, 
so  that  such  amount  would  be  non-recover- 
able.    Vol.  5,  p.  755,  May,  1913. 

Blank  space  for  interest  left  in  note 

746.  (Pa.)  A  promissory  note  is  drawn 
payable  after  date  "with  interest  at  the  rate 
of  ....  per  cent,  per  annum  until  paid." 
Opinion:  The  note  containing  a  blank  space 
for  the  statement  of  the  rate  draws  legal  in- 
terest from  date.  But  if  a  pen  line  is  drawn 
through  the  blank  after  the  words  "at  the 
rate  of,"  this  would  indicate  an  intentional 
erasure  of  the  entire  interest  clause.  Vol.  5, 
p.  240,  Oct.,  1912. 

Calculation  of  interest 

747.  (Iowa.)  The  custom  of  banks  to 
compute  interest  on  the  basis  of  30  days  to  a 
month  is  generally  held  valid  by  the  courts 
and  in  some  cases  sanctioned  by  statute,  but 
in  a  few  states,  including  Iowa,  such  method 
is  held  illegal.     Vol.  8,  p.  612,  Jan.,  1916. 

748.  (Okla.)  A  note  in  the  sum  of 
$100,000,  dated  July  10,  1915,  was  executed 
payable  to  B  "four  months"  after  date  with 
interest  at  the  rate  of  eight  per  cent,  per 
annum.  B  insisted  that  the  interest  be  com- 
puted and  paid  for  the  actual  number  of  days 
from  the  date  of  the  note  to  maturity,  to  wit, 
123  days,  instead  of  on  the  basis  of  4/12  of  a 
year.  Opinion:  The  strict  legal  rule  is  to 
calculate  interest  according  to  the  actual 
number  of  days.  In  some  states  (not  in  Ok- 
lahoma) the  custom  to  calculate  interest  on 
the  monthly  instead  of  daily  basis  has  been 
legalized  bv  statutes.  Vol.  9,  p.  144,  Aug., 
1916. 

Collection  annually  and  at  maturity 

749.  (Kan.)  A  three  year  note  contains 
a  provision  "with  interest  from  date  at  the 


rate  of  six  per  cent,  per  annum."  Opinion: 
The  interest  is  not  collectible  annually,  as  no 
part  of  the  interest  is  due  until  maturity  o£ 
the  principal.  The  words  "payable  annual- 
ly" should  be  added  to  make  the  interest  col- 
lectible annually.     Vol.  6,  p.  683,  April,  1914. 

750.  (Kan.)  A  five  year  note  provides 
"with  interest  at  the  rate  of  seven  per  cent, 
per  annum  from  date  until  paid."  Opinion: 
Interest  is  not  collectible  annually,  as  no  part 
of  the  interest  is  due  until  maturitv  of  the 
principal.     Vol.  2,  p.  107,  Sept.,  1909. 

751.  (Okla.)  A  three  years'  note  con- 
tains a  provision  "with  interest  at  the  rate 
of  eight  per  cent,  per  annum  from  date  until 
paid."  It  further  provides  "interest  to  be- 
come as  principal  when  due  and  bear  the  same 
rate  of  interest."  Opinion:  The  provision 
does  not  call  for  interest  payable  annually 
but  only  at  maturity  of  principal  and  there- 
fore there  can  be  no  compounding  of  unpaid 
interest.     A^ol.  4,  p.  490,  Feb.,  1912. 

752.  (Ore.)  A  mortgage  note  was  made 
payable  ten  years  after  date  "with  interest 
at  the  rate  of  5  per  cent,  per  annum  until 
paid."  The  mortgage  securing  the  note  con- 
tains a  copy  of  the  note  and  provides  that 
payment  of  the  note  is  made  in  accordance 
with  its  terms.  The  makers  of  the  note  re- 
fused to  pay  the  interest  annually.  Opinion: 
The  note  does  not  call  for  interest  payable 
annually  but  only  at  maturity  of  the  princi- 
pal. If  the  mortgage  provided  that  interest 
should  be  payable  annually  this  would  prob- 
ablv  govern  the  provisions  of  the  note.  Vol. 
7,  p.  167,  Sept.,  1914. 

Compound  interest 

753.  (Kan.)  A  note  is  payable  three 
years  after  date  with  interest  at  the  highest 
legal  rate  allowed  in  Kansas,  namely,  10  per 
cent.,  and  contains  a  provision  "Interest  pay- 
able annually  and  if  not  paid  when  due  to 
bear  the  same  rate  of  interest  as  the  princi- 
pal." The  holder  questions  the  validity  of 
the  provision.  Opinion:  (1)  Some  courts, 
for  example  in  Illinois,  hold  such  a  provision 
usurious;  (2)  the  majority  hold  such  pro- 
vision invalid  and  unenforceable  as  contrary 
to  public  policy;  (3)  while  a  few  courts  (Ar- 
kansas, Georgia,  Mississippi,  Oklahoma, 
South  Carolina  and  Washington)  hold  such 
provision  valid  and  enforceable.  The  ques- 
tion has  not  yet  been  decided  in  Kansas.  An 
agreement  made  after  interest  is  due  to  pay 


94 


INTEREST  AND  USURY 


r62 


interest  thereon  is  valid.  If  a  note  such  as 
above  provided  in  any  case  for  sucli  a  rate  of 
interest  that  the  compounding  thereof  down 
to  the  time  of  maturity  of  the  principal  would 
not  exceed  the  simple  interest  at  the  highest 
legal  rate,  the  stipulation  would  in  any  event 
probably  be  valid.  Vol.  6,  p.  682,  April, 
1914. 

754.  (Miss.)  Note  bearing  highest  rate 
of  interest  with  provision  that  unpaid  over- 
due interest  shall  bear  interest  not  usurious 
in  Mississippi.     Vol.  6,  p.  683,  April,  1914. 

755.  (S.  Dak.)  A  note  running  for  a  num- 
ber of  years  contains  a  provision  "with  in- 
terest payable  annually  at  the  rate  of"  etc., 
but  contains  no  provision  that  upon  the  de- 
fault in  payment  of  any  installment  of  inter- 
est, such  interest  shall  itself  bear  interest. 
Opinion:  It  has  been  held  in  Missouri,  Wash- 
ington and  West  A''irginia,  that  without  spe- 
cial agreement  interest  cannot  be  collected 
upon  unpaid  interest.  (Kentucky  and  Texas 
contra.)  The  point  has  not  been  decided  in 
South  Dakota,  but  the  statute  providing  "that 
interest  is  payable  on  all  moneys  at  the  rate 
of  seven  per  cent,  per  annum  after  they  be- 
come due  on  any  instrument  of  writing"  may 
be  construed  to  include  interest  on  unpaid  in- 
terest.    Vol.  3,  p.  403,  Jan.,  1910. 

Discount  greater  than  legal  rate 

756.  (N.  J.)  Where  a  national  bank 
buys  a  note  from  a  broker  acting  directly  for 
the  maker  at  a  discount  of  eight  per  cent., 
the  excessive  discount  of  the  note  for  the 
maker  is  usurious,  but  if  the  note  has  legal 
inception  and  is  acquired  from  an  indorser 
without  recourse,  the  question  of  usury  is 
doubtful.  Where  the  note  is  discounted  at 
an  excessive  rate  with  recourse  on  the  in- 
dorser, the  transaction  is  usurious  as  to  the 
indorser  but  recoverable  in  full  from  the 
maker.  Authorities  on  subject  collected  in 
Vol.  8,  p.  514,  Dec.,  1915. 

757.  (Tenn.)  A  makes  his  note  to  B  for 
value,  and  B  indorses  it  to  C  without  recourse 
at  a  discount  greater  tlian  the  legal  rate  of 
interest.  Opinion:  The  rule  in  Tennessee  is 
that  the  note  is  not  usurious  in  its  inception 
and  that  an  indorser,  who  has  transferred  a 
note  at  a  discount  greater  than  legal  interc-t 
and  has  paid  the  same  to  the  holder,  has  no 
right  of  recovery  of  the  excess  over  the  legal 
interest.  There  are  different  views  held  by 
courts  as  to  the  usurious  nature  of  the  trans- 
action.    Vol.  8,  p.  1104,  June,  1916. 


Legal  rate  collectible  after  maturity 

758.  (Pa.)  A  note  was  issued  in  1906 
for  $1,000  payable  one  year  after  date  and 
bearing  four  per  cent,  interest.  Interest  was 
regularly  paid  at  the  rate  of  four  per  cent, 
until  1910.  Opinion:  The  legal  rate  of  in- 
terest (six  per  cent,  in  Pennsylvania)  governs 
after  maturity,  whether  the  rate  fixed  by  con- 
tract be  greater  or  less  than  the  legal  rate. 
The  holder  of  the  note  should  claim  the  extra 
two  per  cent,  not  paid  by  the  maker  after 
maturity,  unless  he  has  waived  his  right  to 
collect.  '  Vol.  8,  p.  612,  Jan.,  1916. 

759.  (Ohio.)  Where  a  demand  note  in 
Ohio  provides  for  interest  at  eight  per  cent, 
''payable  semi-annually  after  maturity,"  such 
semi-annual  interest  is  collectible  running 
from  date.  Where  the  note  is  drawn  for 
three  months  with  eight  per  cent,  interest 
payable  semi-annually  "after  date,"  it  ia 
doubtful  if  more  than  the  legal  rate  (six  per 
cent,  in  Ohio)  is  collectible  after  maturity, 
for  where  the  contract  does  not  fix  the  rate 
after  maturity,  the  law  fixes  the  legal  rate. 
If  the  interest  clause  were  changed  to  read : 
"with  interest  at  the  rate  of  eight  per  cent. 
per  annum,  payable  semi-annually  from  date 
until  paid,"  the  eight  per  cent,  would  be  col- 
lectible throughout.  Vol.  7,  p.  895,  Mav. 
1915. 

Legal  rate  on  loans 

s.i"  St;: 

760.  (Tenn.)  A  loan  was  originally 
made  at  the  legal  rate  of  six  per  cent.  After 
maturity  the  lender  increased  the  rate  to 
eight  per  cent.,  which  was  received  for  sub- 
sequent indulgence  and  forbearance  of  the 
debt.  Opinion:  The  taking  of  the  eight  per 
cent,  was  usurious  under  the  law  of  Ten- 
nessee.    Vol.  7,  p.  780,  April,  1915. 

761.  (N.  C.)  \  bank  loaned  money  to 
its  depositor  at  six  per  cent.,  the  maximum 
rate  of  interest,  on  condition  that  the  borrow- 
er keej)  a  stated  amount  on  deposit  during  tlie 
period  of  the  loan.  Opinion:  The  loan  ia 
usurious.  The  borrower  would  be  ]»aying  in- 
terest on  the  full  amount  but  would  only  be 
given  the  use  of  a  portion  of  that  amount. 
Vol.  5.  p.  25.  July,  1912. 

Discount   at   meiximum   legal   rate 
See  867 

762.  (Ark.)  A  note  for  $100  having  ten 
months  to  run  was  discounted  t)y  a  bank  by 
taking  $10, — representing  10  per  cent.,  from 


7G3 


DICJEST  OF  LEGAL  OPINIONS 


its  face  valiio.  Tlie  Arkansas  statutes  with 
respect  to  usury  provide  that  all  contracts  for 
greater  rate  of  interest  than  10  per  cent.  ])er 
annum  shall  he  void  as  to  principal  and  in- 
terest, and  further  that  all  notes  whereupon 
there  shall  be  reserved  any  greater  sum  than 
is  prescribed  shall  be  void.  Is  the  note  in 
question  usurious?  Opinion,:  It  has  been 
held  in  Arkansas  that  the  taking  of  the  high- 
est legal  rate  of  interest  in  advance  on  a  ne- 
gotiable note  payable  twelve  months  after 
date  does  not  constitute  usury.  In  the  case 
under  consideration  interest  was  collected  in 
advance  for  one  year,  whereas  the  note  actual- 
ly matured  in  ten  months.  This  plainly 
amounts  to  usury.  Vol.  9,  p.  747,  March, 
1917. 

763.  (Fla.)  In  Florida  and  Georgia  de- 
duction of  interest  in  advance  at  highest  legal 
rate  is  usurious  but  in  Texas,  North  Carolina, 
North  Dakota  and  some  other  jurisdictions, 
such  deduction  is  permissible.  Vol.  10,  p. 
123,  Aug.,  1917. 

764.  (Miss.)  While,  generally,  a  bank 
may  reserve  interest  in  advance  at  the  highest 
legal  rate,  in  Mississippi,  neither  a  national 
nor  a  state  bank  can  collect  such  discount 
without  incurring  the  penalty  of  usury.  Vol. 
5,  p.  591,  March,  1913. 

765.  (Okla.)  In  Oklahoma  the  maxi- 
mum rate  of  interest,  not  exceeding  one  year's 
amount,  may  be  deducted  in  advance  without 
incurring  liability  on  the  part  of  the  lender 
for  usury.     Vol.  9,  p.  585,  Jan.,  1917. 

766.  (Tex.)  Under  the  Texas  statute 
regarding  the  legal  rate  of  interest  Avhich  pro- 
vides that  "the  parties  to  any  written  contract 
may  agree  to  and  stipulate  for  any  rate  of 
interest  not  exceeding  ten  per  cent,  per  an- 
num on  the  amount  of  the  contract,"  it  is  not 
usury  to  deduct  interest  in  advance  at  the 
highest  legal  rate  of  ten  per  cent.  Vol.  9,  p. 
982,  June,  1917. 

Negotiability  affected  by  interest  clause 

767.  (Kan.)  A  note  was  drawn  payable 
one  year  from  date  with  ten  per  cent,  inter- 
est, and  contained  provisions  that  if  the  in- 
terest was  not  paid  annually  it  was  "to  be- 
come as  principal  and  draw  the  same  rate  of 
interest"  and  to  bear  "only  six  per  cent,  in- 
terest if  paid  when  due."  Opinion:  The  note 
is  negotiable  under  the  decisions  in  Kansas. 
Vol.  5,  p.  524,  Feb.,  1913. 

768.  (Kan.)  A  note,  providing  for  in- 
terest from  date  until  paid,  contains  the  fur- 


ther provision  "if  paid  when  due  no  interest 
will  be  charged."  Opinion:  In  Kansas  a  note 
with  such  ])rovision  is  negotiable.  \\\  other 
states  some  courts  hold  it  ncgotialde  and 
some  non-negotiable.  Vol.  3,  p.  81,  Aug., 
1910. 

769.  (Okla.)  A  note  contains  a  provi- 
sion "if  the  interest  be  not  paid  annually 
when  due,  the  same  to  be  added  to  the  prin- 
cipal and  draw  the  same  rate  of  interest." 
The  question  was  raised  as  to  the  negotia- 
bility of  the  note.  Opinion  that  such  provi- 
sion does  not  destroy  negotiability.  Vol.  5, 
p.  174,  Sept.,  1912. 

Parol  evidence  to  prove  usury 

770.  (Okla.)  A  made  his  note  payable 
to  a  bank  for  $193  due  in  ten  months,  with 
interest  from  maturity  at  ten  per  cent.  The 
bank  collected  the  note  and  thereafter  A  sued 
the  bank  for  usurious  interest  to  the  amount 
of  double  the  interest  paid  at  time  of  loan. 
A  introduced  note  as  his  material  allegation 
and  bank  objected  to  any  other  parol  evidence 
being  introduced  to  alter  terms  of  note.  Opin- 
ion: Where  an  action  is  brought  for  usurious 
interest  and  the  note,  pleaded  as  the  material 
allegation  in  support  of  the  usury,  does  not 
itself  indicate  that  the  transaction  was  usur- 
ious, parol  evidence  would  be  admissible  to 
prove  the  usury.     Vol.  5,  p.  661,  April,  1913. 

Partial  payment  applied  to  reduce  interest 

771.  (111.)  A  gave  B  his  note  for  $435.50 
for  two  years,  dated  March  2,  1914,  inter- 
est at  5  per  cent.,  payable  semi-annually.  On 
March  8,  1915,  A  made  his  first  payment  of 
$20,  and  B  indorsed  payment  on  the  note  as 
follows :  "Received  on  the  within  note  $20." 
B  left  the  note  with  a  bank  for  collection, 
with  no  explanation  regarding  the  indorse- 
ment. Opinion:  The  partial  payment  of  $20 
should  be  applied  first  to  the  reduction  of  in- 
terest before  applying  the  surplus,  if  any, 
upon  the  principal.  Compound  interest  can- 
not be  charged  unless  contracted  for.  Vol. 
8,  p.  1103,  June,  1916. 

Payment  of  interest  in  advance 

772.  (Fla.)  Where  a  note  is  executed  to 
bank,  payable  on  demand  with  interest,  and 
at  the  time  of  execution  the  maker  pays  three 
months'  advance  interest  which  the  bank  in- 
dorses upon  the  note,  such  transaction  is 
prima  facie  evidence  of  an  agreement  to  ex- 
tend the  time  of  payment  during  the  period 
for  which  the  interest  is  paid,  which  will 


96 


INTEEEST  AND  USURY 


781 


prevent  the  bank,  unless  it  can  prove  a  con- 
trary agreement,  from  enforcing  payment 
before  the  end  of  the  extended  period.  Note 
payable  at  bank  can  be  charged  to  maker's 
account  at  maturity  without  notification  or 
his  consent  and  bank  owning  note  has  right 
of  set  off  at  maturity.  Vol.  10,  p.  465,  Dec, 
1917. 

773.  (N.  J.)  The  maker  of  a  demand  note 
pays  interest  for  three  months  in  advance  to 
the  bank  holding  the  note.  The  bank  wishes  to 
enforce  payment  on  demand  before  tlio  date 
to  Avhicli  the  interest  is  paid.  Opinion :  Such 
payment  does  not  of  itself  constitute  an  a.^rree- 
ment  extending  the  time  of  payment  of  the 
principal  for  three  months.  In  some  states 
such  payment  is,  and  in  others  is  not,  prima 
facie  evidence  of  agreement  to  extend,  but  it 
is  in  no  case  conclusive  evidence.  Vol.  5,  p. 
311,  Nov.,  1912. 

Payment  of  principal  before  maturity 

774.  (111.)  A  promises  to  pay  B  $6,000 
one  year  after  date  with  interest  at  five  per 
cent. ;  in  other  words,  a  total  of  $G,300.  Six 
months  before  maturity  A  paid  B  $3,000  by 
consent  of  both  parties,  nothing  being  said 
as  to  rebate  of  interest,  and  at  maturity  in 
final  settlement  B  demands  the  balance  and 
full  interest,  $3,300,  while  A  claims  that  there 
should  be  deducted  six  months'  unearned  in- 
terest on  $3,000,  or  $75,  and  all  that  he  owes 
is  $3,225.  Opinion:  Although  the  precise 
question  has  never  been  decided  it  is  probable 
that  if  B  accepted  partial  payment  of  tlie 
principal  in  advance,  he  impliedly  forfeited 
his  right  to  future  interest  upon  such  prepaid 
amount.     Vol.  7,  p.  101,  Aug.,  1914. 

775.  (Miss.)  It  is  not  usury  to  receive 
payment  l)efore  maturity  of  the  full  amount 
due  at  maturity  u])on  note  discounted  at.  or 
carrying,  highest  legal  rate  of  interest.  Vol. 
6,  p.  681,  April,  1914. 

776.  (N.  C.)  A  person  carries  a  note  of 
$5,000  with  a  bank,  {layable  in  5  years.  In- 
terest at  6  per  cent,  is  payal)le  in  advance  for 
six  months  at  a  time,  being  due  Decemlier 
3rd  and  June  3rd  of  each  year.  The  maker 
with  the  bank's  consent  paid  the  full  amount 
of  the  note  in  the  middle  of  March  after 
having  paid  up  the  interest  to  June  3. 
The  bank  allows  rebate  of  3  per  cent.,  but  the 
maker  demands  the  full  6  per  cent,  for  the 
unexpired  term.  Opinion:  Wliere  a  loan, 
upon  Avhich  interest  has  been  paid  in  ailvance, 
is  paid  by  the  del)tor  to  the  creditor  before 
maturity,  the  latter  is  not  liable  for  rel)ate  of 


the  unearned  interest,  in  the  absence  of  an 
agreement  to  make  such  rebate,  and  the  fact 
that  he  voluntarily  rebates  part,  does  not 
make  him  liable  for  the  remainder.  A  pre- 
payment of  the  principal  by  the  debtor,  with 
the  consent  of  the  creditor,  would  be  deemed 
a  voluntary  relinquishment  of  the  interest  for 
the  unexpired  period.  Vol.  11,  p.  607,  May, 
1919. 

Penalty  for  usury 
See  74.5 

777.  (Okla.)  The  usury  laws  of  Okla- 
homa apply  equally  to  individuals  and  to 
firms  and  corporations,  but  in  the  case  of  the 
national  banks,  the  penalty  for  usury  is  pro- 
vided for  in  the  national  and  not  in  the  stiite 
law.     Vol.  6,  p.  574,  Feb.,  19 11. 

778.  (Okla.)  The  provisions  of  the  pro- 
posed Oklahoma  usury  law  (1 )  making  usury 
a  misdemeanor,  (2)  making  it  a  misdemean- 
or for  the  original  holder  to  sell  or  transfer 
a  usurious  instrument,  (3)  prohibiting  the 
filing  of  a  mortgage  or  other  security  given 
for  a  usurious  loan,  and  (4)  prohibiting  suit 
in  court  upon  a  usurious  contract,  will  not,  if 
enacted,  be  applicable  to  national  banks. 
Vol.  6,  p.  30,  July,  1913. 

Rate  on  loans  outside  of  state 

779.  (Mo.)  The  National  Bank  Act  allows 
bank  to  charge  interest  (1)  at  the  rate  al- 
lowed by  the  laws  of  the  state  wliere  a  bank 
is  located  and  no  more,  (2)  except  wliere  a 
higher  rate  is  charged  by  state  banks  of  issue 
they  can  charge  such  higher  rate,  and  (3) 
where  no  rate  is  fixed  by  the  state  law,  not 
exceeding  seven  per  cent.  This  state  rate 
applies  even  though  money  is  loaned  to  bor- 
rowers outside  the  state  where  a  liigiier  rate 
is  allowed.     Vol.  9,  p.  45,  July,  1916. 

780.  (N.  J.)  A  note  drawn  and  payable 
in  Canada  for  $106. S4  is  presented  to  a  bank 
in  New  Jersey.  The  note  e(Uitains  a  .state- 
ment of  the  consideration  for  which  it  was 
given,  as  follows:  (Being  $105.00  j)]us  7  per 
cent,  per  annum).  The  New  Jersey  bank 
raises  the  question  of  invalidity  by  reaj^on  of 
usury.  Opinion:  The  note  is  not  invalid  by 
reason  of  (be  statement.  In  Canada  the 
legal  rate  of  interest  is  5  per  cent.,  l)ut  banks 
may  stij»ula(e  for  and  take  not  exceeding  7 
per  cent.     Vol.  7,  p.  104,  Aug.,  1914. 

781.  (N.  Y.)  A  note  drawn  in  New 
York  payable  in  another  state,  with  interest 
but  without  specifying  the  rate,  carries  inter- 
est at  the  loijal  rale  of  the  state  where  it  is 
payable.     Vol.  9,  p.  907.  May,  1917. 


97 


782 


DIGEST  OF  LEGAL  OPINIONS 


782.  (N.  C.)  The  state  rate  of  interest 
applies,  even  though  money  is  loaned  to  hor- 
rowers  outside  the  state  where  the  higlier 
rate  is  aUowed.  A  national  hank  in  North 
Carolina  where  the  rate  is  (5  per  cent,  would 
be  subject  to  tlie  penalties  for  usury  where  it 
loaned  funds  to  South  Carolina  parties  at  H 
per  cent.,  the  legal  rate  in  that  state,  even 
though  the  note  is  made  payable  in  South 
Carolina  and  suit  was  brought  thereon  in  the 
South  Carolina  courts.  Vol.  10,  p.  854, 
June,  1018. 

Minimum  charge  of  $1  for  small  loans 

783.  (Mass.)  A  national  bank  in  Massa- 
chusetts follows  a  custom  of  making  a  min- 
imum charge  of  $1  to  cover  both  interest  and 
service  in  small  loans.  The  bank  seeks  to 
avoid  the  liability  for  usury  because  the  comp- 
troller contended  that  the  whole  charge 
should  be  counted  as  interest  and  that  so 
counted  it  would  constitute  a  usurious  charge 
in  the  case  of  small  loans.  Opinion:  Under 
the  Massachusetts  statute,  which  allows 
parties  to  contract  for  any  rate  of  interest  or 
discount,  a  minimum  charge  of  $1  deducted 
by  a  national  bank  as  an  interest  and  service 
charge  upon  a  small  loan  is  lawful,  and  with- 
in the  permission  granted  by  the  National 
Bank  Act  to  charge  and  receive  interest  at  the 
rate  allowed  by  the  laws  of  the  state.  Where 
a  national  bank  in  Massachusetts  makes  a 
small  loan  and  deducts  $1  as  an  interest  and 
service  charge  by  oral  agreement  with  the  bor- 
rower, the  conclusion  seems  warranted  that 
such  rate  of  interest  and  charge  is  lawful 
under  the  law  of  Massachusetts,  although  the 
amount  deducted  exceeds  6  per  cent,  interest 
on  the  amount  of  the  loan,  and  that  such  de- 
duction is  within  the  permission  granted  by 


the  National  Bank  Act  that  a  national  bank 
may  deduct  interest  at  the  rate  allowed  by  the 
laws  of  tiie  state.  Vol.  9,  p.  749,  March, 
1917. 

Slight  excess  interest 

784.  (Va.)  A  bank  charged  $7.67  in- 
terest on  a  note  for  $500,  payable  in  three 
months.  At  this  rate  three  renewals  of  the 
note  would  produce  a  year's  income  from  in- 
terest of  $30.42,  whereas  the  straight  interest 
for  one  year  would  be  $30.  Opinion:  The 
slight  excess  interest  is  not  usurious.  Where, 
for  convenience  of  calculation,  interest  is 
taken  slightly  in  excess  of  the  legal  rate,  the 
transaction  is  not  usurious.  Taking  the  in- 
terest of  a  note  in  advance  by  way  of  discount 
is  not  usurious.     Vol.  7,  p.  689,  March,  191.5. 

Usury  pleaded  as  a  defense 

785.  (Okla.)  A  national  bank  loaned  A 
$100,  taking  his  note  for  $106  signed  by  B  as 
surety.  The  loan,  being  for  a  period  less 
than  one  year,  was  usurious,  and  in  a  suit 
against  B  to  collect  the  note,  B  pleaded  usury. 
Opinion:  The  surety  may  defend  on  the 
ground  of  usury  to  the  same  extent  as  the 
principal  debtor.  If  the  defense  was  success- 
ful, the  bank  could  recover  the  principal  sum 
loaned,  but  no  interest.  A'ol.  6,  p.  503,  Jan., 
1914. 

786.  (Va.)  Lender  the  laws  of  Tennessee 
usurious  interest  paid  on  a  loan  is  first  ap- 
plied to  the  payment  of  the  principal  and 
legal  interest,  and  until  such  debt  is  paid,  the 
claim  for  usury  does  not  arise,  and  the  action 
is  barred  in  two  years.  There  is  no  statute 
in  Tennessee  forbidding  a  corporation  from 
pleading  usury.     Vol.  6,  p.  820,  June,  1914. 


LEGAL  TENDER 


Deposit  in  gold  coin  payable  in  legal 
tender 

787.  (Vt.)  A  man  deposited  $1,000  gold 
in  his  bank  and  at  the  end  of  the  year  wishes 
to  withdraw  this  amount  and  demands  gold 
from  the  bank.  Opinion:  A  bank  which  re- 
ceives gold  coin  as  a  general  deposit  is  not 
obliged  to  pay  gold  on  demand  of  depositor, 
but  only  legal  tender,  but  if  gold  was  placed 
with  the  bank  as  a  special  deposit,  the  identi- 
cal thing  must  be  returned.  Vol.  10,  p.  125, 
Aug.,  1917. 


Legal  tender  qualities  of  money 

788.  (Colo.)  Gold  coins  and  standard 
silver  dollars  of  the  United  States  are  legal 
tender  at  their  nominal  value ;  subsidiary 
silver  coins  smaller  than  one  dollar  are  legal 
tender  up  to  ten  dollars ;  minor  coins  (nickel 
and  copper)  are  legal  tender  up  to  twenty-five 
cents;  United  States  notes,  demand  treasury 
notes  and  interest  bearing  treasurj*  notes  are 
legal  tender  in  pa}Tnent  for  all  debts  public 
and  private  except  for  duties  on  imports  and 
interest  on  the  public  debt ;  treasury  notes  are 
legal  tender  in  payment  of  all  debts  public 


98 


LIBEL  AND  SLANDER 


[796 


and  private  and  are  receivable  for  customs, 
taxes  and  all  public  dues ;  gold  and  silver  cer- 
tificates, national  bank  and  Federal  reserve 
notes  are  not  legal  tender,  but  gold  and  silver 
certificates  are  receivable  for  all  public  dues; 
national  bank  notes  are  receivable  for  all 
public  dues  except  duties  on  imports ;  federal 
reserve  notes  are  receivable  by  national  and 
member  banks  and  Federal  reserve  banks  and 
for  all  taxes,  customs  and  other  public  dues. 
For  detailed  statement  showing  exceptions  to 
above  see  Vol.  10,  p.  125,  Aug.,  1917. 

Legal  tender  substitute  for  gold  coin 

789.  (Cal.)  A  bank  desires  to  eliminate 
from  all  notes  payable  to  it  the  words  "Prin- 
cipal and  interest  payable  in  gold  coin  of  the 
United  States,"  and  substitute  the  words 
"Principal  and  interest  payable  in  lawful 
money  of  the  United  States."  Opinion:  A 
note  promising  to  pay  so  many  dollars  is  pay- 
able in  lawful  money,  i.  e.,  legal  tender,  and 
there  is  no  necessity  for  a  provision  specifi- 
cally making  it  so  payable.     A  note  payable 


in  '"'gold  coin  of  the  United  States"  is  speci- 
fically payable  and  enforceable  in  that  medi- 
um.    Vol.  11,  p.  95,  Aug.,  1918. 

790.  (Minn.)  The  customer  of  a  bank 
holds  a  bond  and  mortgage  which  pro\ides 
for  payment  at  maturity  in  gold  coin.  At 
maturity  he  insists  upon  specific  performance 
of  the  contract,  although  gold  is  unobtainable 
at  the  banks.  0[yinion:  Where  a  note  and 
mortgage  provide  for  payment  in  gold  coin, 
the  creditor  is  entitled  to  payment,  speci- 
fically in  gold,  and  can  recover  and  enforce 
judgment  payable  specifically  in  that  medium. 
Should  it  become  physically  impossible  to  ob- 
tain gold,  the  promisor  would  ))e  liable  in 
damages  for  non-performance  but  it  is  dit!l- 
cult  to  see  how  badly  damaged  he  would  be, 
since  paper  legal  tender  is  on  a  par  with  goM. 
Vol.  11,  p.  277,  Nov.,  1918. 

Standard  silver  dollars 

791.  (S.  Dak.)  Standard  silver  dollars  are 
legal  tender  for  any  amount.  Vul.  4,  p.  687, 
May,  1912. 


LIBEL  AND  SLANDER 


XoTE:  A  statute  recommended  by  the  American 
Bankers  Association  which  punishes  the  wilful 
and  nialieious  circuhition  of  statements,  written 
or  oral,  deio^ratory  to  banking  institutions,  lias 
been  passed  in  tlie  foUowinij  states:  Arkansas, 
California,  Connecticut,  Delaware,  Florida,  Kan- 
sas, Kentucky,  Louisiana,  Maryland,  Miehi;j;an, 
Missouri,  Nevada,  New  Jersey,  New  Mexico,  New 
York,  North  Carolina,  Ohio,  Oklahoma,  Oregon, 
Pennsylvania,  Rhode  Island,  Wasiiington,  West 
Virginia,  Wyoming. 

Derogatory  statements  affecting  banks 

792.  (N.  Y.)  The  editor  of  a  newspaper 
wilfully  pulilished  a  statement  concerning  two 
banks  that  "the  deposits  of  the  First  Xational 
are  falling  off  and  of  the  Citizens  are  slowly 
increasing,"  such  statement  l)eing  contrary  to 
fact.  Opinion:  To  establish  the  editor's 
criminal  liability  for  libel,  the  test  is,  was  the 
publication  not  only  untrue  but  malicious  and 
did  such  publication  have  a  tendency  to  in- 
jure the  bank  in  its  l)usiness?  It  is  doubtful 
if  the  editor  can  be  convicted.  Vol.  5,  p.  97, 
Aug.  191-?. 

793.  (Pa.)  A  hotel  num  nuule  a  public 
utterance  of  the  derogatory  and  untrue  state- 
ment that  a  certain  national  bank  "has 
closed,"  thereby  causing  lo-:s  to  the  bank. 
Opinion:  The  person  can  be  prosecuted  crim- 
inally under  the  "derogatory  statement"  act, 
in  force  in  Pennsylvania.     The  bank  can  also 


maintain  an  action  for  slander.  For  the  De- 
rogatory Statement  Act  advocated  by  the 
American  Bankers  Association  see  Vol.  6,  p. 
i:52,  Dec,  1913. 

794.  (Pa.)  A  rival  banker  made  a  de- 
rogatory and  untrue  statement  to  the  effect 
that  a  certain  national  bank  was  not  safe  and 
would  "bust"  and  advised  his  friend  to  with- 
draw his  money  therefrom.  Opinion:  The 
making  of  the  derogatory  statement  would 
render  the  banker  punishal)le  under  the  stat- 
ute enacted  in  Pennsylvania  in  1909,  and  also 
liable  in  a  civil  action  for  slander.  Vol.  5.  p. 
97,  Aug.,  1912. 

795.  (Pa.)  Certain  luiscrupulous  per- 
sons circulated  malicious  reports  of  the  un- 
soundness of  a  bank,  and  such  st^itomcnts  in- 
jured the  bank  but  not  to  a  great  extent. 
Opinion:  Under  a  Pennsylvania  statute  such 
persons  can  be  punished.  Tiie  bank  should 
lay  the  facts  before  the  county  prosecuting 
otiicer  for  the  proper  action,  ^'ol.  'A,  p.  27«), 
Xov.,  1910. 

796.  (Tenn.)  .\  person  tells  several 
customers  that  the  bank  is  in  bad  shape. 
This  statement,  wiiich  is  untrue,  causes  the 
depositors  to  become  frigiitened  and  to  with- 
draw their  funds.  The  bank  wants  the 
offender     punished     criminally.       Ojnnion: 


99 


797 


DIGEST  OF  LEGAL  OPLMOXS 


Slander  or  oral  (leraiiKitioii  is  not  a  crime  at 
common  law  and  a  person  uttering  deroga- 
tory and  untrue  statements  affecting  the  sol- 
vency of  a  hank  oamiot  be  punislied  crimi- 
nally in  the  absence  of  a  statute  making  such 
offense  a  crime.  The  "Derogatory  State- 
ment" Act  drafted  on  behalf  of  this  Associa- 
tion has  been  enacted  in  a  number  of  states 
but  not,  as  yet,  in  Tennessee.  A  civil  action 
for  slander  will  lie.  Vol.  G,  p.  577,  Feb., 
1914. 

797.     (Va.)     The  former  president  of  a 


bank  circulated  derogatory  and  untrue  state- 
ments affecting  its  credit  and  solvency  by  ad- 
vising customers  to  withdraw  their  money, 
as  the  bank  was  going  to  "bust"  and  also 
causing  publication  of  untrue  statements  in 
the  local  newspajicr.  Opinion:  The  bank 
may  maintain  an  action  in  libel  and  slander 
for  damages.  The  offender  is  probably  not 
punishable  criminally  under  the  existing 
statutory  law  of  Virginia,  and  legislation 
covering  this  case  similar  to  that  of  other 
states  is  necessary.     A^ol.  5,  p.  241,  Oct.,  1912. 


LOST  AND  STOLEN  PAPER 


Checks  lost  in  mail 

See   390,   817,   818 

798.  (Ind.)  Bank  A  cashed  a  check  in- 
dorsed to  it  by  its  customer  and  the  check 
was  forwarded  by  mail  for  collection  to  cor- 
respondent bank.  The  check  was  lost  in  the 
mail.  Opinion:  The  right  of  the  correspond- 
ent bank  to  charge  the  amount  of  the  check 
back  would  depend  on  whether  prompt  in- 
quiry was  made  and  Bank  A  was  notified. 
In  the  event  the  amount  was  charged  back 
Bank  A  would  have  recourse  upon  its  custom- 
er as  indorser,  by  causing  substituted  present- 
ment to  be  made  by  means  of  a  copy  or  de- 
scription of  the  check,  and  upon  refusal  to 
pay  by  giving  due  notice  to  the  indorser. 
Had  Bank  A  taken  the  check  as  collection 
agent,  its  duty  would  be  to  notify  its  prin- 
cipal without  unreasonable  delay  and  the 
burden  would  be  upon  the  customer  of  pro- 
curing a  duplicate  or  a  copy  upon  which  to 
make  a  substituted  presentment.  Vol.  2,  p. 
484,  May,  1910. 

799.  (Tex.)  Bank  A  sent  Bank  B  a 
draft  on  Bank  C,  which  Bank  B  credited  to 
Bank  A.  The  draft  was  drawn  by  a  stranger 
and  had  been  indorsed  to  Bank  A  by  one  of 
its  customers.  Two  months  later  Bank  B 
notified  Bank  A  that  the  draft  was  lost  in  the 
mails  and  charged  the  amount  back  against 
Bank  A.  Opinion:  Bank  B  in  delaying  two 
months  is  guilty  of  such  negligence  as  to 
make  the  draft  its  own,  and  cannot  charge  the 
amount  back  to  Bank  A.  \o\.  2,  p.  154, 
Oct.,  1910. 

Checks  signed  in  blank 

800.  (Mo.)  A  drawee  bank  paid  three 
checks,  which  were  signed  in  blank  by  the 
drawer,  and  never  delivered,  but  were  stolen, 
filled    out    and    negotiated.     Opinion:    The 


drawee  which  paid  the  checks  can  charge  the 
amount  to  the  drawer's  account  because  of 
breach  of  an  implied  contract  duty  to  exercise 
care.  The  drawer,  however,  has  a  right  of 
recovery  from  the  banks  which  purchased  and 
collected  such  checks,  because  under  the  rule 
of  the  law  merchant  and  the  Negotiable  In- 
struments Act  an  incompleted  instrument  not 
delivered  is  not  a  valid  contract  in  the  hands 
of  any  holder,  notwithstanding  its  subsequent 
unauthorized  completion  and  negotiation. 
Vol.  7,  p.  219,  Oct.,  1914.     See  293. 

Holder  in  due  course  of  stolen  paper 

See  272,  293,  G47,  823,  827,  894 

801.  (Minn.)  A  draft  by  a  bank  on  its 
correspondent,  issued  to  A,  its  customer,  and 
indorsed  by  A  to  B,  was  claimed  to  have  been 
lost.  A  duplicate  was  issued  and  later  paid 
by  the  bank  in  addition  to  stopping  payment 
upon  the  original.  Eight  and  one-half 
months  after  date  of  the  draft,  the  original 
having  been  found,  was  cashed  by  B  at  a 
bank,  Avhich  presented  it  to  payor  bank  where 
it  was  protested  for  non-payment.  Opinion : 
The  Xegotiable  Instruments  Act  provides  that 
if  an  instrument  payable  on  demand  is  nego- 
tiated an  unreasonable  length  of  time  after 
its  issue,  the  purchaser  is  not  a  holder  in  due 
course.  Under  this,  the  negotiation  of  a 
check  of  a  customer  on  a  bank  eight  months 
after  its  issue  would  probably  be  held  not 
within  a  reasonable  time,  but  a  distinction 
has  been  taken  in  some  cases  between  an  or- 
dinary check  and  a  banker's  draft  as  to  time 
limit  for  negotiation  and  the  question  of  the 
period  of  time  for  free  circulation  of  such 
instruments  before  they  are  discredited  has 
not  yet  been  definitely  settled.  As  to  banker's 
drafts,  the  question  will  remain  somewhat 
problematical  until  a  more  definite  rule  is  es- 
tablished bv  the  courts  indicating  what  is  an 


100 


LOST  AND  STOLEN  PAPER 


SIO 


unreasonable  length  of  time  of  negotiation 
under  Section  53  of  the  Negotiable  Instru- 
ments Act  to  deprive  a  purchaser  of  the  status 
of  a  holder  in  due  course.  Vol.  11,  p.  489, 
March,  1919. 

802.  (Ore.)  A  bank  cashed  a  check 
which  was  indorsed  in  blank  by  the  payee 
and  stolen  from  him.  The  bank  had  no 
notice  of  the  loss.  Payment  of  the  check  was 
stopped.  Opinion:  The  bank  acquired  per- 
fect title  to  the  bearer  check  and  can  enforce 
payment  from  the  drawer  and  the  payee.  Vol. 
7,  p.  776,  April,  1915. 

803.  (S.  Dak.)  A  banker's  draft  was 
stolen  from  a  payee,  who  was  forced  to  in- 
dorse the  draft.  Payment  was  stopped  on 
tlie  draft  and  the  same  was  protested.  The 
payee  wants  a  duplicate  draft.  Opinion: 
Assuming  tliat  the  original  draft  was  not  sur- 
rendered, it  would  not  be  safe  for  the  issuing 
bank  to  issue  a  duplicate  without  receiving 
indemnity  as  protection  against  liability  on 
the  original  which  might  have  been  acquired 
by  an  innocent  purcliaser  for  value  before 
presentment  and  protest.  The  fact  that  the 
indorsement  was  under  duress  would  be  no 
defense  against  a  holder  in  due  course.  Vol. 
7,  p.  580,  Feb.,  1915. 

804.  (W.  Va.)  The  Baltimore  and  Ohio 
Pailroad  Company  issued  its  check  for  $60  to 
John  Doe,  who  indorsed  it  in  blank  and 
cashed  it  with  a  pool  room  proprietor.  Short- 
ly after  the  proprietor  lost  the  check  and  im- 
mediately notified  the  company  not  to  honor 
the  check  if  presented  without  his  indorse- 
ment. The  check  was  stolen  and  negotiated 
to  an  innocent  purchaser  for  value.  Opin- 
ion: Where  a  check,  bearing  indorsement  in 
blank  of  tlie  payee,  is  stolen  from  the  owner 
and  negotiated  to  an  iiiuocont  purchaser  for 
value,  the  latter  is  a  hohler  in  due  course  and 
acquires  title  to  the  check  with  ri^lit  of  en- 
forcement.    Vol.  10,  p.  378,  Nov.,  1917. 

805.  (Wyo.)  A's  clicck  to  H,  iiidorscd 
in  blank  by  the  hitter,  is  stolen  and  ncgotiatcil 
to  K,  an  innocent  purchaser,  for  value.  Pay- 
ment was  stopped  by  A.  Opinion:  K  as 
holder  in  due  course  has  a  right  to  enforce 
payment  from  tlie  drawer  and  indorser.  Tlie 
check  was  nuide  payable  to  bearer  by  the  in- 
dorsement in  blank  and  E  was  an  innocent 
holder  in  due  course,  notwithstanilinu'  it  had 
been  stolen.     Vol.  10,  p.  378,  Nov.,  liMT. 

Instrument  indorsed  in  blank  and  stolen 

806.  (Ariz.)  A  bank  ])iirchiiscd  in  good 
faith  l)efore  maturitv  and  for  value  a  ncLfo- 


tiable  certificate  of  deposit,  indorsed  in  blank 
by  the  payee.  The  seller  from  whom  the 
certificate  was  acquired  had  stolen  the  same 
from  the  payee.  The  issuing  bank  refused 
payment  because  of  a  stop  payment  order. 
0 pillion:  The  purchasing  bank  is  a  holder  in 
due  course  and  may  enforce  payment  from 
the  issuing  bank.  The  certificate  indorsed 
in  blank  is  payable  to  bearer  and  good  title 
could  be  acquired,  even  through  one  who 
had  stolen  it.     Vol.  10,  p.  851,  June,  1918. 

807.  (111.)  A  check  was  indorsed  in 
blank  by  the  payee,  stolen  from  him  without 
delivery  and  negotiated  to  a  merchant  for 
value.  The  drawee  under  a  stop  payment 
order  refused  to  pay  the  check.  Opinion: 
The  bank  is  not  liable  but  the  merchant  as  a 
bona  fide  purchaser  can  recover  from  the 
drawer  and  the  payee,  although  the  check 
was  never  delivered  bv  the  payee.  Vol.  7,  p. 
1001,  June,  1915. 

808.  (N.  Y.)  Where  a  stock  certificate 
indorsed  in  blank  is  lost  by  the  owner  and  sold 
by  the  finder  to  an  innocent  purchaser  for 
value,  latter  acquires  title  as  against  owner 
under  Stock  Transfer  Act  which  gives  full  ne- 
gotiabilitv  to  certificates  of  stock.  Vol.  9,  p. 
M7,  Aug.,  1916. 

809.  (Okla.)  A  cashier's  check  indorsed 
in  h\i\nk  liy  the  payee  was  lost  and  purchased 
by  the  proprietor  of  a  drug  store  from  the 
finder.  The  purchaser  knew  the  seller  to  be 
a  ganilder,  and  that  he  was  not  the  jierson 
named  as  payee.  Payment  of  the  check  was 
stopped  and  the  bank  seeks  to  know  whether 
it  must  reimburse  the  payee  and  also  whether 
it  can  demand  a  return  of  the  check.  Opin- 
ion:  Where  a  cashier's  check  is  indorsed  in 
blank  by  the  payee  and  lost  and  is  purchased 
by  a  nicrrhant  frtun  the  Under,  in  good  faith 
and  for  value,  the  latter  is  a  holder  in  due 
course  with  right  to  enforce  payment  of  the 
instrument,  and  the  fact  that  the  purchnser 
knew  the  seller  to  be  a  gambler  is  not,  of  it- 
self, sullicient  to  deprive  him  of  his  stjitus  an 
holder  in  due  course,  in  the  absence  of  know- 
ledge of  facts  which  would  make  his  tiking 
the  instrument  an  act  of  bad  faith.  Vol.  11, 
p.  27!>,  Nov.,  1918. 

810.  (R.  I.)  A  gave  his  note  payable  at 
a  bank  to  B,  who  lost  the  instrument.  C 
found  it  and  negotiated  it  to  an  innocent  pur- 
chaser for  value,  who  received  payment  at  the 
bank  before  B  could  serve  notice.  Opinion: 
Where  a  note  indorsed  in  blank  by  the  payee 
is  lost  and  negotiated  by  the  finder  to  a  holder 
in  due  course,  the  latter  acquires  a  good  title 


101 


811 


DIGEST  OF  LEGAL  OPINIOXS 


as  a;j:ainst  the  payee.  Assuminf2[  payment  has 
been  stopped  and  notice  of  the  loss  published 
in  the  newspaper,  this  wouhl  not  be  sulhcient 
to  protect  the  maker  and  payee  from  liability, 
unless  it  could  be  ])roved  that  the  purchaser 
for  value  read  the  article.  Vol.  11,  p.  279, 
Nov.,  1918. 

811.  (W.  Va.)  A  check  indorsed  in 
blank  by  the  payee  was  stolen  and  cashed  at 
a  bank.  The  drawer  stopped  payment  before 
the  check  reached  the  drawee.  Opinion:  The 
cashinfj  bank  was  a  bona  fide  purchaser  from 
the  thief,  and  being  a  holder  in  due  course 
can  enforce  against  the  drawer  and  the  in- 
dorser.     Vol.  7,  p.  168,  Sept.,  1914. 

Lost  letter  of  credit 

812.  (Cal.)  A  Texas  bank  issued  a  gen- 
eral letter  of  credit  to  one  J.  E.  C,  authoriz- 
ing the  latter  to  draw  drafts  up  to  $200. 
The  letter  contained  the  signature  of  J.  E. 
C.  for  identification.  The  letter  was  stolen 
and  attached  to  a  forged  draft  for  the  full 
amount  and  cashed  by  a  bank  in  California 
Opinion:  The  California  bank  is  the  loser  and 
cannot  hold  the  bank  issuing  the  letter  of 
credit  responsible.  Vol.  7,  p.  34,  July,  1914. 
See  G19. 

813.  (N.  M.)  A  bank  issued  a  letter 
of  credit  addressed  generally  and  authorizing 
a  specified  customer,  and  not  the  bearer  to 
draw  for  amount  within  thirty  days  from  date. 
The  letter  became  lost  before  any  checks  were 
drawn,  and  the  customer  desired  a  duplicate. 
Opinion :  A  duplicate  can  safely  be  issued  by 
the  bank  without  indemnity  except  as  against 
the  customer's  dishonesty.  The  bank  would 
be  liable  to  bona  fide  purchasers  of  checks  ne- 
gotiated bv  the  customer.  Vol.  8,  p.  908, 
April,  1916. 

Lost  pass-book 

814.  (Cal.)  The  fund  in  a  savings  bank 
had  been  withdrawn  by  a  depositor  upon 
claim  of  loss  of  his  pass-book.  Later  he 
fraudulently  negotiated  to  an  innocent  pur- 
chaser his  draft  and  pass-book  on  the  ac- 
count. Can  payment  of  the  instrument  be 
enforced  against  the  bank?  Opinion:  A 
bank  which  pays  a  savings  deposit  to  its  de- 
positor without  production  of  the  book,  upon 
claim  of  loss,  is  not  liable  to  an  innocent  pur- 
chaser to  whom  a  draft  upon  the  bank,  ac- 
companied by  the  pass-book,  has  been  nego- 
tiated, the  pass-book  not  being  a  negotiable 
instrument.     Vol.  9,  p.  820,  April,  1917. 


815.  (Cal.)  A  savings  bank  depositor 
claimed  tliat  his  bank-l)Ook  was  either  lost  or 
stolen.  ^J'he  bank  re'juired  an  indemnity 
Ijond  in  douijle  the  amount  of  the  deposit,  be- 
fore issuing  a  duplicate  book  or  before  paying 
over  the  balance.  Oirinion:  It  is  customary 
for  savings  banks  to  print  in  pass-books  a  rule 
that  indemnity  will  be  required  before  mak- 
ing payment  in  case  of  loss.  These  pass-book 
rules  are  generally  held  contracts,  but  the 
courts  are  divided  as  to  enforcing  the  contract 
of  indemnity.  A  majority  hold  that  the 
pass-book  being  non-negotiable,  the  bank  is 
protected  if  it  pays  or  issues  a  duplicate  with- 
out indemnity.  But  where  the  bank  is  not 
satisfied  as  to  the  identity  of  the  depositor 
who  claims  payment,  the  right  to  indemnity 
may  be  upheld'.     Vol.  4,  p.  618,  April,  1912. 

816.  (Pa.)  The  depositor  of  a  savings 
bank  lost  his  pass-book  and  applied  for  a 
duplicate.  The  bank  asks  as  to  the  necessity 
of  a  bond  of  indemnity  before  issuing  the  du- 
plicate. Opinion:  There  is  no  necessity  for 
a  bond  of  indemnity  before  paying  money  or 
issuing  a  duplicate,  except  where  the  bank  is 
uncertain  as  to  the  identity  of  its  depositor. 
Ordinarily,  there  is  no  necessity  for  such  re- 
quirement, the  pass-book  being  non-negoti- 
able. Where  there  is  a  by-law  providing  for 
such  indemnity,  the  courts  will  refuse  bank's 
right  to  require  a  bond  unless  some  necessity 
is  shown.     Vol.  5,  p.  662,  April,  1913. 

Duplicate  for  lost  checks 
See  824 

817.  (Colo.)  A  check  was  lost  in  the 
mail  after  the  payee  had  deposited  it  in  his 
bank.  Opinion:  Where  the  bank  takes  the 
check  as  owner,  it  has  the  burden  of  obtaining 
a  duplicate  and  the  duty  of  presenting  the 
item  in  order  to  charge  the  indorser  in  case 
of  dishonor ;  but  if  the  bank  received  the  item 
for  collection,  its  duty  is  simply  to  notify  the 
customer  of  the  loss  without  unreasonable  de- 
lay. The  legal  right  of  the  bank  to  charge 
back  to  a  customer  a  check  lost  in  the  mail 
depends  on  where  title  to  the  check  rests, 
which  must  be  determined  by  the  rule  of  law 
in  the  state  where  the  bank  is  located,  or  may 
depend  upon  agreement  or  custom.  Vol.  2, 
p.  155,  Oct..- 1909.     See  798. 

818.  (N.  C.)  A  customer  mailed  to  his 
bank  several  checks  for  deposit.  The  bank 
acknowledged  receipt  by  regular  card  but  the 
checks  were  misplaced  by  the  bank  before 
they  were  entered  in  the  books  to  his  credit. 
After  seven  months,   the  customer  claimed 


102 


LOST  AXD  STOLEN  PAPER 


S25 


credit  for  these  items,  which  the  bank  refused 
to  give  without  receiving  duplicates  of  the  lost 
checks.  The  bank  had  forwarded  monthly 
statements  of  the  depositor's  account,  in  each 
of  which  there  was  an  omission  of  the  credit. 
Opinion:  The  bank  cannot  refuse  to  give  the 
customer  credit  before  obtaining  duplicate, 
but  there  is  an  equitable  obligation  on  his 
part  to  give  the  bank  all  the  information  in 
his  power  to  enable  the  bank  to  frame  dupli- 
cates or  written  particulars  upon  which  pre- 
sentment for  payment  can  be  made,  and  the 
drawer  ultimatelv  looked  to  for  payment. 
Vol.  4,  p.  192,  Feb.,  1912. 

Duplicates  for  lost  government  bonds 

819.  (W.  Va.)  Where  coupon  bouds  of 
the  government  are  lost  or  stolen  and  are  ac- 
quired by  a  bona  fide  purchaser  from  a  finder 
or  thief,  the  hitter's  title  is  superior  to  that  of 
the  former  owner  and  there  is  no  provision 
of  the  Federal  Statutes  to  protect  the  original 
owner  in  such  case.  But  where  such  bonds 
are  wholly  or  partly  destroyed  or  defaced  and 
can  be  identified,  the  Federal  Statutes  provide 
for  the  issue  of  duplicates  upon  giving  of  in- 
demnity and  also  provide  for  the  issue  of  dup- 
licates for  lost  or  destroyed  registered  bonds. 
Vol.  11,  p.  41,  July,  1918. 

Duplicate   for  lost  stock  certificates 

820.  (N.  J.)  A  stockholder  in  a  bank 
claimed  to  have  lost  his  certificates  of  stock 
unindorsed.  The  bank  wishes  protection 
against  dishonesty.  Opinion:  The  l)ank 
should  issue  duplicate  certificates  and  re<iuiro 
a  sufficient  bond  of  indemnity  of  tlie  stock- 
holder. The  object  of  the  boiul  is  to  protect 
the  bank  against  tlie  claim  of  a  bona  fide  pur- 
chaser for  value  of  the  lost  certificates  who 
derived  title  tiirough  the  stockholder,  wlio 
may  have  been  dishonest.  Vol.  3,  p.  (576, 
May,  1911. 

821.  (Ohio.)  A  stockhohlcr  of  a  na- 
tional bank  claims  to  have  lost  his  certificate 
and  requests  a  duplicate.  Opinion:  As  a  cer- 
tificate of  stock  is  freely  transferable  by  the 
owner,  the  bank  is  entitled  to  a  bond  of  in- 
demnity to  ]irotect  it  against  liability  upon 
the  oris,nnal  certificate.  Vol.  11,  \^.  391,  Jan., 
1919.  " 

822.  (W.  Va.)  A  corporation  refused  to 
issue  a  new  certificate  of  stock  to  replace  one 
stolen  from  the  owner,  unless  the  owner  fur- 
nished a  surety  conijiany  bond.  The  owner 
tendered  an  individual  indemnity  bond, 
which  was  refused  by  the  corporation,  pur- 


suant to  a  provision  in  its  by-laws.  Opin- 
ion: The  corporation  cannot  enforce  the 
by-law,  which  requires  a  surety  company  as 
distinguished  from  an  individual  bond  before 
issuing  dujjlicate  for  stolen  certificate.  The 
character  and  sufficiency  of  the  bond  is  for 
the  court  to  determine  if  the  jiarties  cannot 
agree.     Vol.  G,  p.  G84,  April,  liH4. 

823.  (W.  Va.)  Certain  certificates  of 
stock  were  lield  by  a  national  bank  as  collat- 
eral security  and  were  lost  through  robbery. 
To  enable  the  owners  of  the  lost  stock  certifi- 
cates to  procure  (luj)licates,  the  bank  became 
surety  on  indemnity  bonds.  Opinion:  It  was 
not  an  ultra  vires  act  for  the  bank  to  become 
surety,  for  although  the  loss  of  stock  certifi- 
cates imposes  no  real  loss  upon  the  owner  in 
the  absence  of  statute  conferring  full  nego- 
tiability, but  only  the  burden  of  obtaining 
duplicates,  the  bank  has  a  special  title  in  such 
certificates  and  an  interest  in  obtaining  du- 
]^licates  to  be  lodged  with  it  as  security,  so 
long  as  the  loan  is  unpaid,  which  would  make 
the  giving  of  indemnity  an  act  in  its  own  in- 
terest aiul  within  its  powers.  Vol.  4,  p.  425, 
Jan.,  1912. 

Indemnity  bond  for  issue  of  duplicates 
Si-e   81G,   H-22,   82.S 

824.  (Mo.)  A  bank  issued  to  A  its 
cashier's  check  which  was  lost.  Before  issu- 
ing a  duplicate,  the  bank  rcijuested  an  indem- 
nity bond  in  double  the  amount.  A  refused 
to  give  the  bond,  but  produced  an  affidavit 
that  the  check  was  lost  witluuit  indorsement. 
Opinion:  The  bank  is  entitled  to  re(|uire  in- 
demnity as  a  pre-requisite  to  paying  the  cash- 
ier's check  alleged  to  be  unindon-^ed  when 
lost,  for  notwithstanding  the  affidavit,  the 
bank  would  not  be  relieved  from  liability  to 
pay  an  innocent  purchaser  should  the  affidavit 
prove  false  or  should  the  payee  thereafter  find 
and  negotiate  the  original  cashier's  check. 
Vol.  8,  p.  707,  Feb.,  191G. 

825.  (Neb.)  A  depositor,  who  claimed 
he  had  lost  his  certificate  of  deposit,  in- 
structed the  bank  to  stop  ]>ayment  thereon 
and  applied  for  a  duplicate  certificate,  al- 
though he  could  not  alTord  an  indoninity 
boiul.  The  l)ank  was  not  well  aci]uainted 
with  the  depositor.  Opinion :  Whore  a  dejws- 
itor  claims  that  his  neirotiable  certificate  of 
deposit  has  been  lost  or  stolen,  the  only  safe 
course  for  the  bank  is  to  require  a  bond  of 
indemnity  before  issuing  a  second  certificate. 
But  if  the  amount  of  certificate  is  small  and 
the  bank  believes  the  statement  of  the  depos- 
itor, it  can  waive  the  bond  and  take  the  de- 


103 


82G 


DKIKST  OF  LEGAL  OPINIONS 


positor's    adidavit.     Vol.    5,    p.    301,    Nov., 
1912. 

826.  (N.  Dak.)  Where  a  bank  issues  its 
tlral't  upon  its  correspondent  in  favor  of  a 
third  party  who  claims  to  have  lost  same  and 
requests  a  duplicate,  tlie  issnin<i;  bank  as  a 
pre-requisite  to  issuing  such  duj)licate  is  en- 
titled to  a  l)ond  of  indemnity  to  save  it  harm- 
less should  tlic  original  be  negotiated  under 
indorsement  of  the  payee,  but  where  a  draft 
is  made  payable  directly  to  the  correspondent 
upon  which  drawn  and  is  lost,  duplicate  may 
safely  be  issued  without  indemnity.  Vol.  10, 
p.  598,  Feb.,  1918. 

Effect  of  "duplicate  unpaid"  on  draft 

827.  (Wash.)  A  Washington  bank 
issued  to  its  customer  a  draft  on  New  York, 
which  was  stolen  from  the  payee  after  he  had 


indorsed  it.  A  duplicate  draft  was  issued 
and  paid.  Afterwards  the  st^jlen  draft  was 
cashed  for  value,  was  forwarded  by  the  holder 
for  })ayment  and  was  protested.  Opinion: 
I'lic  Wasl)ington  bank  is  lialjle  to  the  holder 
and  would  have  remedy  over  against  its  cus- 
tomer. If  in  this  case  the  original  draft  had 
upon  it  the  words  "duplicate  unpaid,"  the 
drawer  would  not  be  liable  to  the  holder. 
Vol.  4,  p.  28,  July,  1911.     See  909. 

Unsigned  bank  currency  stolen  and 
circulated 

828.  (Pa.)  Where  national  bank  notes 
are  lost  or  stolen  and  put  into  circulation 
without  the  signature  or  upon  forged  signa- 
tures, the  public  is  protected,  and  the  bank 
and  not  the  holder  stands  the  los?.  Vol.  6, 
p.  684,  April,  1914. 


MAIL 


Acceptance  of  offer  by  mail 


Loss  of  registered  mail 


829.  (Utah.)  A  from  Salt  Lake  City 
makes  an  offer  to  B  in  New  York  City,  which 
B  accepts  by  mail.  The  question  is  asked 
whether  the  contract  is  made  when  B  places 
his  acceptance  in  the  mail,  and  would  B  have 
power  to  revoke  his  acceptance  by  telegraph 
before  A  received  it.  Opinion:  Where  an 
offer  is  made  by  mail,  acceptance  by  post,  dis- 
patched in  due  time  as  far  as  the  acceptor  is 
concerned,  concludes  the  contract,  notwith- 
standing delay  or  miscarriage  of  the  letter  of 
acceptance.  It  is  always  sufficient  that  the 
offer  be  accepted  in  the  mode  either  expressly 
or  impliedly  required  by  the  offeror.  There 
is  a  contrary  view  in  Massachusetts.  Eevo- 
cation  of  an  acceptance  is  valid  if  communi- 
cated before  the  acceptance  is  communicated. 
Vol.  11,  p.  493,  March,  1919. 

Gift  of  bank  draft  through  mail 

830.  (111.)  A  sister,  intending  to  make 
a  gift  to  her  brother,  purchased  a  bank  draft 
payable  to  his  order  and  mailed  it  to  him. 
The  brother  died  before  the  mail  was  deliv- 
ered, O'pini'On:  The  gift  was  not  completed 
for  want  of  delivery  and  the  sister  and  not 
the  brother's  estate  is  entitled  to  the  money 
represented  by  the  draft.  In  this  case,  the 
post-office  is  not  to  be  regarded  as  the  agent 
of  the  brother,  and  delivery  to  the  post-office 
is  not  delivery  to  the  addressee.  Vol,  6,  p.  92, 
Aug.,  1913. 


831,  (Ark.)  Where  a  bank  receives  for 
collection  a  draft  with  Liberty  bonds  payable 
to  bearer  attached  and  forwards  same  through 
the  registered  mail,  it  would  appear  that  such 
method  of  forwarding  (without  insuring  the 
package  unless  the  amount  is  unusually  large) 
is  the  exercise  of  reasonable  care  and  the  bank 
would  not  be  responsible  where  the  securities 
are  lost  through  robbery  of  the  post-office. 
The  fact  that  the  draft  was  mailed  direct  to 
the  payor,  although  held  by  some  courts  a 
negligent  method,  would  not  charge  the  bank 
with  responsibility  where  neglect  or  failure  of 
the  pavor  was  not  the  cause  of  loss.  Vol.  11, 
p.  559;  April,  1919. 

832,  (Kan.)  A  mail  pouch  containing  a 
registered  package  addressed  from  one  bank 
to  anotlier  was  stolen  from  one  of  the  trucks 
at  a  railroad  depot.  The  package  contained 
$1,500  currency  and  was  being  transported  by 
the  railroad  company.  Opinion:  The  nature 
of  the  railroad's  employment  in  carrying 
registered  or  imregistered  mail  is  as  public 
agent  and  not  as  common  carrier  for  the  in- 
dividual, and  there  is  no  liability  to  the  in- 
dividual owner  for  loss  of  registered  mail 
caused  by  negligence  or  even  theft  of  a  rail- 
road employee,  unless  in' a  particular  case  the 
negligence  of  the  corporation  itself,  as  distin- 
guished from  its  subordinates,  was  the  direct 
cause  of  the  loss.     Vol.  3,  p.  678,  :\fay,  1911. 

833,  (W,  Va,)  A  bank  received  a  letter 
and  check  purporting  to  be  signed  by  A,  its 


104 


MARRIED  WOMEN" 


843 


customer,  requesting  the  amount  be  sent  by- 
registered  mail  to  A  at  a  place  named.  The 
check  and  letter  were  forged  b}-  a  person  im- 
personating A.  The  bank  sent  the  money  by 
registered  package  addressed  to  A  at  the 
place  named,  and  the  postmaster  delivered  it 
to  the  impersonator.  The  bank  reimbursed 
its  customer  and  seeks  to  hold  the  postmaster 
liable  because  he  failed  to  procure  proper 
identification  before  delivering  the  registered 


package.  Oinnion:  The  postmaster  would 
not  be  personally  liable  unless  guilty  of  neg- 
ligence in  the  performance  of  his  official  duty, 
and  where  he  delivered  the  package  to  the 
precise  person  who  had  asked  that  the  money 
be  forw  arded  and  whom  the  bank  intended  as 
the  person  to  receive  it  in  mistaken  belief 
that  such  person  was  its  customer,  it  is  doubt- 
ful if  the  postmaster  could  be  held  liable. 
Vol.  4,  p.  757,  June,  1912. 


MARRIED  WOMEN 

See  Husband  and  Wife,  664-6(58. 


Married  women  as  surety  and  accommo- 
dation party 

834.  (Ga.)  Under  the  laws  of  Georgia, 
a  woman  cannot  bind  herself  as  surety  or  ac- 
commodation indorser,  except  that  she  will 
be  held  liable  thereon  to  a  bona  fide  holder  for 
value  without  notice  of  the  character  of  the 
indorsement.     Vol.  9,  p.  418,  Nov.,  191G. 

835.  (Minn.)  A  married  woman  in 
Minnesota  owning  eighty  acres  of  land  be- 
came surety  on  the  note  of  another  person. 
Opinion:  A  married  woman  in  Minnesota  has 
capacity  to  bind  herself  as  surety  upon  the 
note  of  another,  and  her  property  is  liable  for 
her  debts  the  same  as  if  unmarried.  Vol.  G, 
p.  270,  Oct.,  1913. 

836.  (Mo.)  In  Missouri  a  married 
woman  has  power  to  make  contracts  in  lier 
own  name  and  bind  herself  as  suretv  upon  her 
husband's  note.     Vol.  6,  p.  270,  Oct.,  1913. 

837.  (N.  J.)  A  note  dated  and  payable 
in  New  York,  and  bearing  the  indorsement  of 
a  married  woman  wlio  was  a  resident  of  New 
Jersey,  was  presented  at  a  New  York  bank  for 
discount.  Opinion:  In  New  Jersey  a  mar- 
ried woman  cannot  bind  herself  as  accommo- 
dation indorser  or  surety,  unless  estopped  to 
deny  liability.  But  the  bank  has  the  right 
to  presume  that  the  indorsement  was  made  in 
New  York,  where  the  same  is  valid,  and  the 
married  woman  is  estopped  from  denying 
that  lier  inrlorsemcnt  is  a  New  York  contract. 
Vol.  9,  p.  238.  Sept.,  1916. 

838.  (N.  J.)  In  New  Jersey,  a  married 
woman  cannot  bind  herself  upon  a  note  ex- 
ecuted for  the  accommoflation  of  another  un- 
less she  or  her  sej)arate  estate  derives  a  bene- 
fit therefrom.  But  a  married  woman  can 
make  a  note  for  a  loan  to  herself,  although  in- 
tending to  turn  the  money  over  to  her  hus- 
band. In  such  a  case  a  note  executed  by  the 
married  woman  as  sole  maker,  jiayable  to  a 
bank  and  indorsed  by  her  husband,  would  be 


safe  as  an  enforceable  instrument,  and  the 
proceeds  should  be  paid  bv  the  bank  to  tlie 
wife.     Vol.  -i,  p.  597,  March,  1913. 

839.  (N.  J.)  Under  the  law  of  New 
Jersey  a  married  woman  cannot  bind  herself 
as  accommodation  indorser,  and  the  fact  that 
the  paper  so  indorsed  is  made  by  a  corpora- 
tion, of  which  she  is  a  stockholder,  does  not 
make  the  indorsement  binding  upon  her 
under  the  New  Jersey  statute.  \o\.  3,  p. 
401,  Jan.,  1911. 

840.  (Pa.)  A  bank  discounted  tlie  note 
of  a  married  woman,  where  it  contained  a 
declaration  that  the  funds  were  for  her  pri- 
vate use,  chargeable  against  her  separate  es- 
tate. Opinion:  Payment  could  be  enforced 
Iiy  the  bank  unless  it  knew  that  the  married 
woman  was  in  fact  a  mere  accommodation 
maker.  In  Pennsylvania,  a  married  woman 
can  bind  herself  on  a  note  executed  for  her 
own  lienefit,  but  not  as  accommodation  maker 
for  another.     Vol.  6,  p.  758,  May,  1914. 

841.  (Pa.)  In  Pennsylvania  every  re- 
striction im]H»sed  by  the  common  law  upon 
the  capacity  of  a  married  wi»man  to  contract 
has  been  removed,  except  in  two  cases:  (1) 
she  cannot  become  accommodation  indor.ter. 
maker,  guarantor  or  surety  for  another;  and 
(2)  she  cannot,  unless  her  husband  joins,  con- 
vey or  mortgage  her  real  estate.  For  a  cita- 
tion of  decisions  showing  detailed  develop- 
ment of  the  law.  see  Vol.  5,  p.  65H,  April. 
1!M3. 

842.  (Pa.)  .\  married  woman  in  Penn- 
sylvania has  no  power  to  bind  herself  as  ac- 
commodation indorser,  whether  it  be  for  the 
accommodation  of  her  hupi>and  or  other 
maker.  The  Enabling  .\ct  of  1893  exprcs.sly 
excepts  contract.^;  of  this  character.  Vol.  3, 
p.  1  i:..  Sept..  1910. 

843.  (W.  Va.)  In  West  Virginia  a  mar- 
ried woman  can  bind  herself  as  .•surety  upon 
note  of  her  husband.  Vol.  7.  p.  383,  Dec., 
1914. 


105 


844 


MINORS  AND  INCOMPETENTS 


Contracts  of  persons  under  guardianship 

844.  (Minn.)  An  old  man  was  put 
uiuler  j^aiardiHiisliip  on  May  2G,  11)10.  Not 
knowiiifj^  this,  a  bank  on  October  31,  ]!)10, 
consolidated  three  notes,  which  he  owed  it, 
into  one  and  surrendered  the  old  ones.  Two 
of  the  notes  were  dated  prior  to  the  guardian- 
ship. Opinion:  The  ]\Iinnesota  statute  makes 
contracts  of  a  person  put  under  guardianship 
void — but  notes  given  before  the  guardian 
was  appointed  are  collectible,  if  acquired  in 
good  faith  and  without  notice  of  the  incom- 
petency. The  bank  would  have  a  right  in  a 
proper  proceeding  to  recover  the  amount  of 
the  two  notes,  which  were  surrendered  under 
mistake  of  fact.     Vol.  5,  p.  99,  Aug.,  1912. 

Liability  of  minor  as  stockholder 

845.  (Fla.)  A  minor  was  presented  with 
a  share  of  stock  in  a  national  bank,  the  trans- 
fer being  registered  on  the  books.  Fifteen 
months  later  the  bank  failed  and  the  receiver 
is  trying  to  enforce  the  full  100  per  cent, 
assessment  against  the  parent  of  the  child. 
Opinion :  The  minor  cannot  be  held  liable  for 
the  assessment,  as  he  has  no  capacity  to  assent 
to  become  a  stockholder,  but  the  person  mak- 
ing the  transfer  is  not  relieved  from  liability. 
The  parent  of  the  minor  cannot  be  held  liable 
for  the  assessment  unless  he  himself  owned 
the  stock  and  transferred  it  to  his  child. 
Vol.  11,  p.  5G1,  April,  1919. 

Payment  by  bank  to  incompetent  deposi- 
tor unsafe 
See    275,    302 

846.  (Cal.)  A  "trusty"  in  a  hospital  for 
treatment  of  the  insane  had  earned  and  de- 
posited in  a  bank  a  considerable  sum  of 
money.  The  "bank  questions  its  right  to 
allows  the  depositor  to  withdraw  any  of  his 
deposit.  Opinion:  The  bank  should  make 
payment  only  to  the  legally  appointed  guard- 
ian. It  would  be  unsafe  to  pay  the  "trusty" 
who  has  been  judicially  declared  insane  and 
has  not  been  discharged  as  cured.  Vol.  5,  p. 
380,  Dec,  1912. 

847.  (N.  Y.)  Checks  are  signed  by  a 
depositor,  who  is  in  a  sanitarium  taking  the 
"gold  cure"  for  alcoholism  and  wdiose  father 
notified  the  bank  that  the  depositor  is  in- 
competent. Opinion:  The  safest  course  is  for 
the  bank  to  refuse  to  honor  the  checks  until 
it  is  reasonably  sure  that,  in  issuing  them,  the 


drawer  was  in  possession  of  his  reason  sujfi- 
ciently  to  know  the  nature  of  his  acts.  The 
liability  a  bank  would  iiK.ur  for  injuring  the 
depositor's  credit  in  a  case  of  pos^ilde  com- 
petency would  be  negligible.  Vol.  2,  p.  229, 
Dec,  1909. 

Payment  of  check  to  infant  agent 

848.  (Wis.)  A  customer  sends  his  son, 
a  minor,  to  the  bank  to  cash  checks  amount- 
ing to  $1,000.  In  the  event  the  boy  is  robbed 
on  his  return  to  his  father,  would  the  bank 
in  any  way  be  liable?  Opinion:  An  infant 
or  minor  may  act  as  the  agent  of  another  per- 
son and  a  bank  which  pays  a  check  to  an  in- 
fant, who  has  been  authorized  by  his  prin- 
cipal to  collect  same,  is  protected,  although 
the  money  is  lost  by  or  stolen  from  tlie  infant 
and  never  reaches  the  principal.  Vol.  10,  p. 
714,  April,  1918. 

Withdrawal  of  deposit  by  minor 

849.  (N.  Y.)  Tlie  Xew  York  statute 
allowing  banks  to  pay  deposits  to  minors 
w^ould  probably  be  held  applicable  to  national 
banks.  The  statute  contemplates  a  deposit 
by  or  in  the  name  of  any  minor,  and  requires 
that  the  bank  shall  hold  the  deposit  for  the 
benefit  of  the  minor  with  the  authority  to  pay 
the  same  to  him.  There  is  no  provision  fix- 
ing a  minimum  aae  limit.  Vol.  9.  p.  502, 
Dec,  1916. 

850.  (N.  Y.)  A  minor  deposited  $25  in 
a  bank,  obtaining  the  bank's  certificate  of  de- 
posit. The  minor  indorsed  the  certificate  to 
a  firm  in  payment  for  a  suit  of  clothes.  Be- 
fore the  certificate  reached  the  bank  for  pay- 
ment, the  minor's  father  stopped  payment. 
Opinion:  The  bank  has  the  right  to  pay  the 
amount  of  the  certificate  to  a  bona  fide  in- 
dorsee of  the  minor,  although  the  father  or- 
dered the  bank  not  to  pay.  The  indorsement 
by  the  minor  would  pass  the  property  in  the 
certificate  to  the  indorsee,  although  the  minor 
might  not  be  lialile  on  the  indorsement.  Vol. 
5,  p.  243,  Oct.,  1912. 

Withdrawal  of  deposit  by  parent 

851.  (Cal.)  A  bank  which  holds  a  de- 
posit of  a  minor  receives  the  following  letter : 

"First  Xational  Bank  of ,  Gentlemen : 

You  and  each  of  you  are  hereby  notified  not 

to  cash  any  more  checks  drawn  by , 

my  son,  he  being  a  minor,  until  further  notice 


106 


MORTGAGES 


S59 


from  his  father.  Signed,  his  father."  The 
bank  asks  if  it  should  obey  the  instructions. 
Opinion:  Where  a  minor  makes  a  deposit  to 
his  personal  credit  and  there  is  a  statute,  as 
in  California,  exempting  such  deposit  from 
the  control  of  all  persons  except  creditors  and 
authorizing  pa3'ment  to  the  minor,  it  is  be- 
yond the  power  of  the  father  of  the  minor  to 
stop  payment  of  the  minor's  check.  A  par- 
ent, as  natural  guardian,  cannot  control  or 
withdraw  a  deposit  to  the  credit  of  a  minor 
in  the  absence  of  leijal  appointment  as  guard- 
ian of  the  estate.     Vol.  11,  p.  G09,  May,  1919. 

852.  (Cal.)  A  father,  who  deposited 
money  in  a  bank  in  California  to  the  credit 
of  his  son,  a  minor,  has  no  right  to  withdraw 
the  same.  By  statute  in  California,  the  bank 
holds  the  deposit  free  from  the  father's  con- 
trol and  may  pay  the  same  to  the  minor, 
taking  his  receipt  or  acquittance  therefor. 
Vol.  5,  p.  244,  Oct.,  1912. 

853.  (N.  J.)  A  parent  cannot  withdraw 
a  deposit  to  the  credit  of  a  minor  without 
letters  of  guardianship.  When  the  New  Jer- 
sey statute  provides  that  such  deposit  shall  be 
held  for  the  ''exclusive  right  and  benefit"  of 


the  minor  and  "free  from  control  of  all  other 
persons  except  creditors"  and  "shall  be  paid" 
to  the  minor  whose  receipt  shall  be  a  dis- 
charge to  the  bank,  it  is  doubtful  whether 
even  a  legally  appointed  guardian  would 
have  the  right  to  withdraw  the  deposit;  and 
it  is  uncertain  whether  this  statute  applies  to 
a  national  bank.     Vol.  5,  p.  52(j,  Feb.,  191  :i. 

854.  (Pa.)  Inder  decisions  in  Penn- 
sylvania a  parent  has  no  right  to  withdraw  a 
deposit  to  the  credit  of  a  minor  child,  even 
though  the  parent  made  the  dejiosit;  the  par- 
ent cannot  control  the  child's  property  unless 
he  ha?  been  duly  appointed  as  guardian  and 
the  judicial  policy  of  Pennsylvania  is  not  to 
appoint  the  parent  as  curator  of  the  child's 
estate.  The  statute  in  Pennsylvania  on  this 
subject  allows  the  bank  to  pay  the  deposit  to 
a  minor  free  from  the  control  of  the  legally 
ap))ointed  guardian.  Vol.  6.  p.  32,  Julv, 
1913. 

855.  (Tex.)  A  parent,  as  natural  guard- 
ian, cannot  withdraw  a  deposit  to  the  credit 
of  a  minor  in  the  absence  of  a  legal  appoint- 
ment as  guardian  of  the  estate.  Vol.  9,  p. 
422,  Xov.,  1916. 


MORTGAGES 


Mortgage  in  name  of  cashier 

856.  (Wis.)  A  mortgage  runs  to  "John 
Doe,  Cashier,  First  National  Bank,"  and  an 
assignment  of  such  mortgage  is  executed  by 
"John  Scott,  Cashier,  First  National  Bank," 
successor  of  Doe.  Opinion :  The  courts  would 
be  likely  to  hold  that  the  mortgage  so  drawn 
and  assignment  so  executed  were  instruments 
running  to  and  executed  by  the  bank  and  not 
the  person  named  as  cashier  individually,  but 
the  authorities  are  not  all  uniform.  Although 
a  national  bank  has  no  power  to  take  a  real 
estate  mortgage  for  a  present  loan,  only  the 
Government  can  complain  and  the  mortgage 
as  ])etween  the  parties  is  not  invalidated. 
Vol.  5,  p.  1  Of),  Aug.,  1912. 

Chattel   mortgages 
See   738,   864 

857.  (Colo.)  A  note  was  payable  on  de- 
mand, and  the  chattel  mortgage  given  to  se- 
cure the  same  provided  that  if  the  mortgagor 
shall  pay  the  note  of  even  date  "due  on  de- 
mand after  date,  or  if  no  demand  is  made, 
then  note  is  due  two  years  from  date,"  the 
mortgage  shall  be  void.  Opinion:  A  reason- 
able construction  is  that  the  debt  matures  in 
two  years  unless  sooner  demanded  and  the 


holder  is  protected  for  thirty  days  thereafter 
under  the  Colorado  statute  allowing  thirty 
davs  after  maturitv  of  the  debt  to  take  posses- 
sion of  the  chattels.  Vol.  8.  p.  :^1.  Julv. 
1915. 

858.  (Iowa.)  A  chattel  mortgai:*'  wms 
given  to  secure  the  purchase  price  of  personal 
property  bought  by  a  man  at  a  farm  sale. 
The  bank  to  wiiom  the  mortgage  was  exe- 
cuted asks  whether  it  is  necessary  to  have  his 
wife  join  in  the  mortgage.  The  question  is 
raised  in  view  of  the  Iowa  Code  (Sec.  290('i, 
Code  1897)  which  provides  as  follows:  "That 
no  incumbrance  of  personal  property  which 
may  be  held  exempt  from  execution  by  the 
head  of  a  family,  if  a  resident  of  the  state. 
shall  be  of  any  validity  as  to  such  exempt 
property,  utdess  the  husband  and  wife,  if  both 
are  living,  concur  in  ami  sisrn  the  same  joint 
instrument."  Opinion:  Iowa  statute  which 
invalidates  chattel  mortpige  of  exempt  prop- 
erty unless  both  husliand  and  wife  join  in 
mortgage,  does  not  require  joinder  of  wife 
where  mortgage  executed  to  secure  purchase 
price  of  propertv.  Vol.  11,  p.  609,  May, 
1919. 

859.  (Kan.)  In  the  absence  of  a  statute 
requiring  the  specific  amount  .secured  to  be 


107 


800 


DIGEST  OF  LEGAL  OPINIONS 


stated  in  the  cliattel  mortf]faKe,  tlio  weight  of 
authority  is  to  the  elTect  tliat  a  provision  in 
the  mortpjagc  that  it  is  given  to  secure  a  speci- 
fied amount  and  "any  other  indehtedness"  to 
the  mortgagee  on  future  advances  is  valid  and 
enforceahle.  Where  the  statute  (as  in  Kan- 
sas) requires  the  filing  of  an  affidavit  upon 
renewal  sjuHMfically  stating  the  amount  yet 
due  and  un])aid  under  the  chattel  mortgage, 
it  is  qnestionahlc  whether  additional  advances 
therafter  made  would  he  protected  as  against 
a  subsequent  incumbrance  under  the  terms  of 
the  chattel  mortgage  which  secures  "any 
other  indehtedness,"  and  it  would  be  unsafe 
to  make  an  additional  loan  during  the  pen- 
dency of  the  renewal.  Vol.  6,  p.  62G,  March, 
3914. 

860.  (Kan.)  A  note  was  dated  and  de- 
livered in  January  and  a  chattel  mortgage  to 
secure  its  payment  was  given  by  the  maker 
of  the  note  the  following  February.  Opin- 
ion: The  chattel  mortgage  was  valid.  The 
mortgage  should  bear  the  date  of  its  actual 
execution,  reference  being  made  in  the  body 
thereof  to  the  note.  Vol.  6,  p.  213,  Sept., 
1913. 

861.  (Neb.)  The  owner  of  a  farm  filed 
a  lease  containing  an  agreement  by  the  lessee 
to  execute  a  chattel  mortgage  on  the  crops  as 
soon  as  planted  and  growing.  Opinion:  The 
lessor  would  not  be  protected  against  a  sub- 
sequent mortgagee  of  the  crops  after  they 
were  grown,  in  the  event  the  promised  mort- 
gage was  not  given.  Vol.  7,  p.  308,  Nov., 
1914. 

862.  (Neb.)  An  order  of  release  of  a 
chattel  mortgage  in  Nebraska  must  be  at- 
tested and  unless  a  chattel  mortgage  w'hich 
has  been  paid  is  discharged  in  one  of  the  two 
modes  prescribed  by  the  statute  within  ten 
days  after  request,  the  mortgagee  would  be 
liable  to  the  statutory  penalty.  Vol.  5,  p. 
23,  July,  1912. 

863.  (N.  J.)  A  bank,  through  its  exec- 
utive committee,  sanctioned  a  loan  of  $1,500, 
crediting  this  amount  to  a  mortgagor  and 
taking  as  evidence  three  four-months'  notes 
of  $500  each,  secured  by  a  chattel  mortgage. 
The  mortgagor  orally  agreed  with  the  bank's 
cashier  that,  in  case  the  committee  a  week 
hence  should  object  to  the  amount  of  the  loan, 
the  mortgagor  would  then  consent  to  charging 
back  $500  before  maturity.  The  bank  under 
the  New  Jersey  chattel  mortgage  act,  filed  an 
affidavit  of  consideration,  which  did  not  in- 
clude the  oral  agreement.  The  statute  pro- 
vides that  a  mortgage  is  absolutely  void  as 


against  creditors  of  the  mortgagor  unless  it 
has  annexed  thereto  an  affidavit  stating  the 
consideration  of  tiie  mortgage.  The  mort- 
gagor became  bankrupt  and  the  bank  relies  on 
the  validity  of  the  mortgage  to  recover  the 
loan.  Opinion:  It  would  seem  that  the  affi- 
davit stating  that  the  consideration  of  the 
chattel  mortgage  was  for  $1,500,  was  the 
substantial  truth  and  should  not  be  held 
defective,  and  the  mortgage  should  not  be 
held  void  because  it  did  not  include  a  state- 
ment of  the  oral  agreement.  Vol.  5,  p.  446, 
Jan.,  1913. 

Foreclosure  of  mortgage 

864.  (Iowa.)  In  the  case  of  the  fore- 
closure of  a  mortgage  on  realty  in  Iowa,  a 
personal  judgment  is  rendered  against  the 
mortgagor  (save  in  some  excepted  cases),  and 
a  special  execution  issues  against  the  mort- 
gaged property;  and  where  the  debt  is  not 
satisfied  a  general  execution  for  the  deficiency 
issues  against  any  other  realty  than  held  by 
the  mortgagor.  In  the  case  of  the  fore- 
closue  of  a  chattel  mortgage  in  Iowa,  where 
the  proceeds  of  a  sale  of  the  mortgaged  chat- 
tels are  insufficient  to  pay  the  mortgage,  the 
mortgagor  is  personally  liable  for  the  defi- 
ciency.    Vol.  7,  p.  99fi,  June,  1915. 

Mortgage  notes 
See  790 

865.  (Colo.)  A  mortgage  note  payable 
to  a  bank  was  indorsed  by  the  bank  to  John 
Doe  or  Anna  Doe  without  recourse.  John 
Doe  died  and  the  mortgagor  is  ready  to  pay 
the  note  at  maturity,  but  hesitates  to  receive 
the  release  signed  by  Anna  Doe.  Opinion: 
Anna  Doe  could  execute  a  good  release  to  the 
mortgagor  upon  payment  and  surrender  of 
the  note.  The  note  indorsed  by  the  bank 
payable  to  alternative  payees  is  negotiable 
imder  the  Negotiable  Instruments  Law  and 
the  indorsement  by  either  one  of  the  payees 
passes  title.     Vol.  8,  p.  611,  Jan.,  1916. 

866.  (Mo.)  A  first  mortgage  real  estate 
note  gave  the  maker  the  option  to  pay  $100  or 
any  multiple  thereof  on  the  principal  at  the 
maturity  of  any  coupon  by  giving  the  holder 
of  the  note  thirty  days'  notice  in  writing  of 
his  intention.  The  maker  gave  notice  that 
he  would  pay  the  whole  note  at  maturity  of  a 
certain  interest  coupon.  At  such  maturity 
the  maker  paid  the  interest  but  concluded  not 
to  pay  the  principal  until  it  was  due.  Opin- 
ion: The  mere  giving  of  notice  of  intention 
does  not  mature  the  note,  where  the  intention 


108 


NATIONAL  BANKS 


872 


has  not  been  carried  out  by  payment  of  the 
principal.     Vol.  3,  p.  586,  April,  1911. 

867.  (Neb.)  A  real  estate  mortgage 
given  to  secure  a  loan  drawing  ten  per  cent, 
interest,  the  highest  legal  rate  in  Nebraska, 
contains  a  clause  providing  that  the  mort- 
gagor shall  pay  taxes  levied  upon  the  mort- 
gage or  debt,  or  against  the  holder.  Opinion: 
The  clause  would  probably  render  the  trans- 
action usurious,  because  it  calls  for  payment 
of  taxes  in  addition  to  the  highest  legal  rate. 
Such  a  clause  was  formerly  held  to  render 
the  mortgage  note  non-negotiable  but  a  Ne- 
braska statute  now  provides  that  its  negotia- 
bility is  unaffected.  Vol.  8,  p.  419,  Nov., 
1915. 

Priority  between  mortgage  and  mechan- 
ic's lien 

868.  (N.  C.)  A  mortgagor  caused  some 
improvements  to  be  made  upon  his  property 
after  he  had  mortgaged  it  to  a  bank.  The 
party  making  the  improvements  was  not  paid 
and  duly  filed  a  mechanic's  lien.  Thereupon 
the  property  was  sold,  but  the  proceeds  were 


only  sufficient  to  cover  the  mortgage.  Opin- 
ion: In  the  absence  of  a  statute  giving  the 
mechanic's  lien  priority,  a  prior  recorded 
mortgage  takes  precedence  over  a  subsequent 
mechanic's  lien.     Vol.  1,  p.  140,  Oct.,  1908. 

Wrong  description  in  mortgage 

869.  (Okla.)  A  national  bank  as  mort- 
gagee of  certain  real  estate  recorded  the 
mortgage  and  learned  tliat  the  mortgage 
papers  described  a  different  parcel  of  land 
from  that  intended.  Opinion:  If  the  owner 
of  the  real  estate  which  through  error  was  not 
described  disposes  of  his  rights  therein  by 
sale  or  by  mortgage  to  an  innocent  purchaser 
for  value,  the  latter's  rights  are  superior  to 
those  of  the  bank,  regardless  of  the  recorded 
mortgage,  but  the  bank  has  an  equitable  title, 
good  against  the  owner  or  attacliing  creditor. 
The  course  to  pursue  is  to  have  the  owner  cor- 
rect the  mistake  by  giving  a  new  correct  mort- 
gage and  have  that  mortgage  recorded ;  if  the 
owner  refuses,  to  file  a  bill  in  equity  to  compel 
reformation  of  the  mortgage.  Vol.  4,  p.  431, 
Jan.,  1912. 


NATIONAL  BANKS 

See  Banks  and  Banking,  164-193 ;  Branch  Banks,  261-265. 
Advertising    for   "savings"    accounts         Deposits  with   trust  company  permitted 


870.  (N.  Y.)  A  national  bank  about  to 
establish  a  savings  department  asks  if  there 
is  any  state  law  prohibiting  it  from  using  the 
words  "savings  department"  or  "savings"  in 
advertising  in  this  connection.  Opinion: 
The  conclusion  seems  warranted,  despite 
state  laws  prohibiting  other  tiian  savings 
banks  from  using  or  advertising  the  word 
"savings"  or  from  transacting  business  as  a 
savings  bank,  that  it  would  be  held  within 
the  power  of  a  national  bank,  free  from  con- 
trol of  state  laws,  to  establish  and  advertise 
a  savings  department  and  for  savings  ac- 
counts (in  so  doing  necessarily  using  and 
advertising  tlie  word  "savings''),  and  to  carry 
on  sucli  department  in  the  same  manner  that 
a  savings  bank  carries  on  its  business  subject, 
of  course,  to  national  laws  and  regulations  of 
tlie  Federal  Reserve  Board.  The  question 
will  not  be  positively  settled  until  decided  by 
the  court  of  last  resort.  Wliile  there  may  be 
danger  of  violating  a  state  law  and  of  incur- 
ring a  penalty  of  $100  a  day,  it  is  for  tlie  na- 
tional banks  to  consult  their  own  attorneys 
upon  the  proposition.  Vol.  9,  p.  404,  Nov., 
1910.    See  188. 


871.  (Ind.)  Tlie  Federal  Reserve  Act 
permits  a  national  bank  to  carry  on  deposit 
with  a  trust  company  to  the  extent  of  ten 
per  cent,  of  its  own  paid-up  capital  and  sur- 
plus.    Vol.  8,  p.  805,  March,  1916. 

Examination  by  revenue  officer 

872.  (N.  J.)  The  Collector  of  Internal 
Revenue  of  a  certain  district  in  New  Jersey 
sent  a  man  to  examine  the  notes  of  a  national 
bank  to  see  if  they  were  properly  stam{>cd. 
The  bank  officer  refu-sed  him  permission. 
Opinion:  According  to  the  decision  of  a  Fed- 
eral district  court  in  Pennsylvania  (contrary 
to  the  decision  of  another  Federal  district 
court),  a  national  l)ank  officer  lias  no  right  to 
refuse  permission  to  an  int<'nial  revenue 
officer  or  agent,  acting  luider  Section  3177» 
Rev.,  Stat.,  to  examine  tlie  notes  in  its  pos- 
session to  see  if  properly  stamped,  and  the 
bank  is  not  exempted  because  of  Section  5241, 
Rev.  Stat.,  limiting  visitorial  powers  to  the 
Comptroller  and  the  courts,  but  only  an 
officer  or  agent  authorized  l)y  the  statute  has 
such  power  of  examination,  whicli  cannot  be 
delegated  to  a  clerk  or  other  person.     Section 


109 


873 


DIGEST  OF  LECJAL  OPINIONS 


21  of  the  Federal  Eeserve  Act  lias  amplified 
Section  5241,  Eevised  Statutes,  and  provides 
"No  bank  shall  lie  subject  to  any  visitorial 
powers  other  than  such  as  are  authorized  by 
law,  or  vested  in  the  courts  of  justice  or  such 
as  shall  be  or  shall  have  been  exercised  or  di- 
rected by  Congress,  or  by  either  House  there- 
of, or  by  any  committee  of  Congress,  or  of 
either  house  duly  authorized."  Vol.  11,  p. 
390,  Jan.,  1919.  *  See  173,  1312,  1324. 

Federal  jurisdiction 

873.  (N.  Y.)  The  United  States  courts 
had  jurisdiction  in  cases  brought  by  and 
against  the  Second  United  States  Bank  but 
not  in  cases  by  and  against  the  First  United 
States  Bank.  The  Federal  statutes  formerly 
conferred  jurisdiction  upon  the  circuit  court 
in  all  suits  brought  by  or  against  national 
banks  in  the  district,  but  this  was  repealed 
in  1882  and  the  statute  now  provides  that  the 
jurisdiction  of  suits  by  and  against  national 
banks,  except  suits  between  them  and  the 
United  States  or  its  officers  and  agents,  shall 
be  the  same  as  and  not  other  than  the  juris- 
diction of  suits  by  or  against  banks  not  or- 
ganized under  any  law  of  the  United  States. 
Vol.  6,  p.  504,  Jan.,  1914. 

Guaranty  of  draft 

See   177  ct  seq 

874.  (Tenn.)  B  in  Tennessee  drew  on 
A  in  Ohio  and  a  national  bank  in  Ohio  wired 
a  bank  in  Tennessee  that  it  would  guarantee 
that  B's  draft  would  be  paid.  The  Tennessee 
bank  paid  B  the  amount  of  the  draft,  but 
could  not  collect  from  the  national  bank 
which  was  enjoined  from  making  payment. 
Opinion:  The  national  bank  had  no  power  to 
guarantee  B's  draft  in  which  it  had  no  inter- 
est and  from  which  it  derived  no  substantial 
benefit.  The  guaranty  was  idtra  vires  and 
unenforceable.  The  same  underlying  prin- 
ciple applies  as  well  to  state  bank  and  trust 
companies.  Vol.  4,  p.  27,  July,  1911;  Vol. 
4,  p.  152,  Sept.,  1911. 

Limit  of  loan  by  national  bank 

875.  (Col.)  A  national  bank  with  a  cap- 
ital and  surplus  of  $90,000,  having  loaning 
capacity  of  $9,000  to  any  one  borrower,  dis- 
counted a  note  of  a  state  bank  for  $8,000  and 
allowed  such  bank  to  overdraw  its  account  by 
$2,500.  Opinion:  The  national  bank  ex- 
ceeded the  legal  limit  of  its  loaning  power. 
Vol.  9,  p.  422,  Nov.,  1916. 


876.  (111.)  When  the  limit  is  loaned  by 
a  national  bank  to  a  corporation,  an  addi- 
tional loan  to  a  stockholder  is  not  excessive 
unless  corporation  is  maker  or  indorser  on 
paper  or  loan  to  stockholder  is  for  its  benefit. 
The  National  Bank  Act  contemplates  that  no 
loan  in  excess  of  the  limit  shall  be  granted  to 
any  one  interest.     Vol.  5,  p.  108,  Aug.,  1912. 

877.  (N.  Y.)  Certain  national  bank  ex- 
aminers made  a  ruling  that  the  purchase  of 
drafts  with  bills  of  lading  attached  in  excess 
of  ten  per  cent,  of  the  capital  and  surplus  of 
the  bank  created  an  excess  loan  to  the  concern 
issuing  the  drafts ;  that  such  excess  loan  was 
a  violation  of  Section  5200,  United  States  Ee- 
vised  Statutes,  unless  the  drafts  are  accepted 
by  the  drawee  before  the  purchase  by  the 
bank.  Opinion:  Such  ruling  is  not  war- 
ranted by  the  law  and  will  not  be  sustained 
by  the  courts.  The  Comptroller  of  the  Cur- 
rency concurs  in  the  opinion  that  Section 
5200,  U.  S.  Revised  Statutes,  excepting  from 
the  10  per  cent,  limit  of  indebtedness  of  any 
one  person  of  money  borrowed  '^the  discount 
of  bills  of  exchange  drawn  in  good  faith 
against  actually  existing  values*'  does  not  re- 
quire that  such  bills  of  exchange  must  be  first 
accepted  before  purchase.  Vol.  1,  p.  300, 
Feb.,  1909. 

878.  (N.  Y.)  Section  5200  U.  S.  Eev. 
Stat,  limiting  loans  by  any  association  to  a 
single  borrower  to  ten  per  cent,  of  capital  and 
surplus,  although  not  judicially  passed  upon 
is  construed  as  not  including  liability  of  the 
borrower  for  the  interest  upon  the  principal 
sum  loaned.     Vol.  10,  p.  780,  May,  1918. 

879.  (Pa.)  A  national  bank  with  a  cap- 
ital and  surplus  of  $50,000  loaned  A  and  B 
as  individuals  $1,500  and  $2,500  respectively. 
A  and  B  as  partners  want  to  borrow  in  ad- 
dition ten  per  cent,  of  the  capital  stock 
and  surplus.  Opinion:  The  National  Bank 
Act  limits  liability  of  any  one  borrower  for 
money  borrowed  to  ten  per  cent,  of  capital 
and  surplus  and  includes  in  the  liability  of  a 
firm  the  liabilities  of  the  several  members. 
The  proposed  loan  would  therefore  be  ex- 
cessive.    Vol.  9,  p.  350,  Oct.,  1916. 

880.  (Tex.)  A  national  bank  loaned  to 
a  firm  ten  per  cent,  of  it^  capital  and  surplus. 
An  individual  member  of  the  firm  asked  for 
a  further  loan  of  ten  per  cent.  Opinion: 
The  further  loan  to  such  individual  member 
of  the  firm  would  be  excessive  and  violative  of 
the  National  Bank  Act.  Vol.  4,  p.  758,  June, 
1912. 


110 


NATIONAL  BANKS 


887 


881.  (W.  Va.)  Section  24  of  the  Fed- 
eral TJeserve  Act  empowering  national  banks 
to  make  loans  on  farm  lands  in  an  aggrcgaie 
sum  equal  to  25  per  centum  of  its  capital  and 
surplus  does  not  modify  Section  5200,  U.  S. 
Revised  Statutes,  limiting  loans  to  a  single 
borrower  to  10  per  cent,  of  capital  and  sur- 
plus and  no  national  bank  may  loan  to  any 
person  upon  real  estate  more  than  10  per 
cent,  of  its  capital  and  surplus.  Vol.  11,  p. 
559,  April,  1919. 

Loan  on  certificates  of  deposit 

882.  (N.  J.)  There  is  nothing  in  the 
National  Bank  Act  to  prohibit  a  bank  from 
loaning  money  on  the  security  of  its  own  cer- 
tificates of  deposit.  It  cannot,  however,  loan 
on  the  security  of  its  own  shares  of  stock. 
Vol.  2,  p.  374, "March,  1910. 

Power  to  donate  services  of  clerk 

883.  (111.)  The  right  and  power  of  a 
national  bank  to  furnish  such  gratuities  as 
check  books,  pass-books,  calendars  and  other 
articles  of  utility  has  never  been  brought  into 
question.  Should  a  dissatisfied  stockholder 
complain,  the  furnishing  of  such  gratuities 
to  a  reasonal)le  extent  would  proliably  be  held 
within  the  implied  powers  of  the  bank,  as  in 
case  of  gratuitous  collections.  It  has  been 
held  an  executive  officer  has  no  power  to  do- 
nate the  bank's  funds  for  erection  of  a  paper 
mill.  The  donation  of  services  of  a  clerk  to 
assist  in  conduct  of  a  public  sale  as  a  means 
of  getting  business  for  the  bank  might  be 
witliin  its  implied  powers ;  at  all  events  not  a 
serious  abuse  of  power.  Vol.  5,  p.  063,  April, 
1913. 

Power  to  loan  on  mortgage 

See  S.jC),  8S1 

884.  (W.  Va.)  A  customer  borrowed 
money  from  a  national  bank,  and  e.xecuied  a 
mortgage  as  security.  The  customer  later 
became  bankrupt.  Opinion:  The  security  is 
valid  as  against  the  borrower  and  his  credit- 
ors, and  only  the  Governnient  can  attack  the 
transaction  as  an  ultra  vireff  act.  Tiie  liank 
can  hold  the  security  as  against  the  trustee  in 
liankru|)tcy  of  the  borrower.  Vol.  4,  p.  755, 
June,  1912. 

National  bank  as  surety 

885.  (Tenn.)  -\  national  liank  has  no 
power  to  become  guarantor  of  the  obligation 
of  another  person  in  which  it  has  no  inter- 
est. The  individual  members  of  the  board 
of  directors  of  a  national  bank  desiring  to  be- 


come sureties  on  the  bond  of  a  county  oflRcial 
have  the  power  so  to  do,  but  cannot  bind  the 
bank  upon  such  a  contract.  A'ol.  G,  p.  212, 
Sept.,  1913. 

886.  (W.  Va.)  A  national  bank  as 
pledgee  of  certain  stock  certificates  pledged 
as  collateral  becomes  surety  on  an  indemnity 
bond  authorized  by  its  directors  to  enable  the 
owner  to  obtain  duplicate  for  the  stock  col- 
lateral, which  has  been  stolen  from  the  bank. 
Opinion:  The  execution  of  such  indemnity 
bond  by  the  bank  either  as  principal  or  surety 
was  probably  within  the  power  of  the  bank 
and  even  if  ultra  vire.<i  the  directors  would  not 
Ije  held  personally  liable  by  reason  of  such 
authorization.     Vol.  4,  p.  688,  May,  1912. 

Trust  powers 

887.  (Mo.)  Inquiry  is  made  as  to  the 
right  and  extent  a  national  liank  having  been 
vested  with  trust  powers  can  exercise  func- 
tions of  executor  and  trustee  in  states  other 
than  the  state  where  it  is  located.  Opinion: 
Congress  has  now  granted  national  banks, 
when  permitted  by  the  Federal  Reserve 
Board,  and  when  not  in  contravention  of  state 
or  local  law.  "the  right  to  act  as  trustee,  ex- 
ecutor, administrator,  registrar  of  stocks  and 
bonds,  guardian  of  estates,  assignee,  receiver, 
committee  of  estates  of  lunatics  or  in  any 
other  fiduciary  capacity  in  which  state  banks, 
trust  companies  or  other  corporations  which 
come  into  competition  with  national  banks 
are  permitted  to  act  under  the  laws  of  the 
state  in  which  the  national  bank  is  located." 
Section  11  K,  Federal  Reserve  .Act.  as 
amended  September  20,  191S.  It  would 
seem  to  follow  from  this  that  whenever  a 
trust  company  or  other  corporation  is  em- 
powered by  the  laws  of  the  state  in  which  ft 
national  bank  is  located,  or  has  the  power  by 
general  grant  witho\it  restriction  as  to  place, 
to  exercise  the  functions  of  executor  or  trustee 
in  a  state  other  than  that  of  its  location,  the 
national  bank,  if  otherwise  eligible,  would 
have  like  power,  subject,  of  course,  to  the  re- 
strictions, liinit^ations  or  prohibitions  imposed 
l)V  the  laws  (»f  such  other  state  upon  the  exer- 
cise by  foreign  corporations  of  trust  powers 
witliin  its  borders.  .Assuming  that  a  trust 
company  in  any  state  and  consequently  a 
national  bank  grant^^d  etpiivaletit  trust  powers 
has  the  power  to  exercise  the  function  of  ex- 
ecutor and  trustee  outside  the  state,  then  the 
abilitv  to  exercise  such  functions  in  another 
state  would  depend  upon  the  restrictions,  lim- 
itations or  prohibitions  imposed  upon  foreign 
trust  corjiorations.  if  anv,  bv  the  laws  of  such 
state.     Vol.  11.  p.  553,  April.  1919. 


Ill 


888 


NEGOTIABILITY 


Effect  of  acceptance  indorsed  on  back  of 
bill 

888.  (Pa.)  All  acceptance  by  the  drawee 
imlorsed  on  tiie  back  of  the  bill,  instead  of 
being  written  across  the  face,  while  unusual, 
is  valid  at  coniiuou  law.  Under  the  Nego- 
tiable Instruments  Act,  however,  the  holder 
is  entitled  to  acceptance  '^on  the  bill,"  pre- 
sumable on  its  face,  but  if  the  holder  takes  the 
indorsed  acceptance,  the  instrument  is  valid 
and  negotiable.     Vol.  11,  p.  673,  June,  1919. 

Certainty  as  to  payee 

See  8(55 

889.  (Del.)  A  note  is  made  payable  to 
"A,  B,  C,  and  others"  because  there  is  not 
room  enough  to  insert  the  names  of  all  the 
payees.  The  negotiability  of  the  note  is 
questioned  and  it  is  also  asked  how  a  nego- 
tiable form  of  note  could  be  drawn  to  cover 
such  case.  Opinion:  The  note  is  not  nego- 
tiable because  of  uncertainty  as  to  the  payee. 
Where  it  is  desirable  to  draw  a  note  to  a 
number  of  payees  and  the  blank  form  of  the 
note  does  not  provide  sufficient  space  for  their 
names,  a  special  blank  form  w^ith  sufficient 
space  should  be  provided.  Vol.  5,  p.  449, 
Jan.,  1913. 

890.  (Minn.)  A  customer  offers  for  sale 
a  note  in  which  the  name  of  the  payee  is 
missing.  Is  the  note  payable  to  bearer? 
Opinion:  A  note  wherein  no  payee  is  named 
or  indicated  with  reasonable  certainty  is  in- 
complete and  not  negotiable.  But  where  the 
note  contains  a  blank  for  the  name  of  the 
payee  which  is  unfilled,  under  the  law  mer- 
chant the  instrument  was  payable  to  bearer 
and  negotiable  and  carried  impliedly  author- 
ity to  a  bona  fide  purchaser  to  fill  the  blank 
and  complete  the  instrument;  but  under  the 
Negotiable  Instruments  Act  the  blank  must 
be  filled  strictly  in  accordance  with  the  au- 
thority given  and  if  the  holder  negotiates 
such  an  instrument  without  authority,  the 
purchaser  is  put  on  inquiry  and  it  is  subject 
to  defenses  in  his  hands.  Vol.  11,  p.  94, 
Aug.,  1918.    See  960. 

Certainty  of  place  of  payment 

891.  (Mass.)  A  check  is  drawn  upon  a 
bank  in  Vermont  "'payable  if  desired  at  the 
Blank  National  Bank,'  Boston."  In  view  of 
the  two  places  of  payment,  negotiability  is 
questioned.  Opinion:  The  negotiability  of  a 
check  drawn  on  one  bank  "payable  if  de- 


nired  at"  another  bank  is  uncertain.  It  de- 
])ends  on  whether  the  instrument  is  construed 
to  be  drawn  on  two  drawees  in  the  alternative, 
in  which  case  it  would  be  non-negotiable,  or 
whether  on  one  drawee  with  two  places  of 
jiaymcnt,  in  which  case  it  would  probably  be 
negotiable.  Checks  drawn  "payable  if  de- 
sired at"  are  prohil)ited  in  the  New  York 
Clearing  House.     Vol.  5,  p.  377,  Dec,  1912. 

Certainty  as  to  time  of  payment 
See    895,    989 

892.  (Cal.)  A  note  contained  the  fol- 
lowing provision :  "Said  interest  payable 
quarterly,  and  if  not  paid  when  it  becomes 
due,  the  principal  and  all  accrued  interest 
shall  at  the  election  of  the  payee  immediately 
become  due  and  payable."  Opinion:  In  Cal- 
ifornia this  provision  destroys  the  negotia- 
bility of  the  note,  but  this  is  contrary  to  the 
weight  of  authority.  Vol.  7,  p.  221,  Oct., 
1914. 

893.  (Md.)  A  note  contains  a  clause, 
"It  is  agreed  that  failure  to  pay  any  one  note 
at  maturity  shall,  at  the  option  of  the  holder, 
mature  all  unpaid  notes  of  this  series." 
Opinion:  There  is  conflict  of  authority  as  to 
the  effect  this  clause  has  upon  the  negotia- 
bility of  the  note,  and  it  would  not  be  safe  for 
a  bank  to  treat  it  as  negotiable  unless  located 
in  a  jurisdiction  where  the  law  was  favorable. 
Vol.  5,  p.  752,  May,  1913. 

Negotiability  of  certificate  of  stock 

894.  (N.  J.)  The  holder  of  a  stock  cer- 
tificate of  a  corporation  properly  indorsed  in 
blank  transferred  it  to  a  bank  as  security  for 
a  loan.  The  loan  was  unpaid  and  the  cer- 
tificate was  presented  by  the  bank  to  the  cor- 
poration, which  refused  to  transfer  or  return 
it,  claiming  that  the  same  had  been  stolen. 
Opinion:  Except  in  states  which  have  passed 
the  Uniform  Transfer  of  Stock  Act  a  certifi- 
cate of  stock,  though  properly  indorsed  in 
blank,  is  not  completely  negotiable,  and  a  pur- 
chaser from  a  finder  or  thief  takes  no  title 
as  against  the  true  owner.  Vol.  5,  p.  248, 
Oct.,  1912. 

895.  (N.  Y.)  A  note  payable  "on  or  be- 
fore" a  certain  date  is  a  negotiable  instrument 
and  to  hold  the  indorser  must  be  presented 
at  maturity  and  the  indorser  notified.  The 
provision  "on  or  before"  gives  the  maker  an 
option  to  pay  before  maturitv  and  possiblv 
save  interest.     Vol.  2,  p.  187,  Nov.,  1909. 


112 


NEGOTIABILITY 


903 


Effect  of  extension  clause 
See  772,  773,  896  et  scq.,  963  ct  seq 

896.  (Iowa.)  A  form  of  note  is  sub- 
mitted by  an  Iowa  bank  containing  an  exten- 
sion clause  as  follows:  "We  further  agree  to 
the  extension  of  this  note  on  payment  of  the 
interest  by  either  of  us,"  and  the  question  is 
asked  whether  such  clause  affects  its  negotia- 
bilit3\  Opinion:  Presumably  one  of  the 
makers  is  principal  and  the  others  sureties, 
but,  however  this  may  be,  it  provides  a  con- 
sent by  the  makers  that  time  of  payment  may 
be  extended  on  payment  of  interest.  The 
extension  clause  does  not  give  the  holder,  of 
his  own  motion,  an  absolute  right  to  extend 
the  time  of  payment,  but  contemplates  a 
future  agreement  of  extension  between  the 
holder  and  some  one  of  the  makers.  Under 
the  reasoning  of  the  Supreme  Court  of  Iowa 
the  clause  would  destroy  the  negotiability  of 
the  note,  because  the  time  of  payment  is  un- 
certain to  all  of  the  makers  save  one.  An- 
other extension  clause  reads  as  follows :  "The 
indorsers  and  guarantors  of  this  note  consent 
that  time  of  payment  may  be  extended  with- 
out notice  thereof."  This  clause  would  not 
destroy  the  negotiability  of  the  note  because 
neither  the  maker  nor  the  holder  could  of  his 
own  motion  postpone  the  time  of  payment. 
Vol.  10,  p.  655,  March,  1918. 

897.  (Okla.)  A  note  contains  a  clause, 
"the  makers  and  indorsers  x  x  x  hereby  con- 
sent that  time  of  payment  may  be  extended 
without  notice  thereof."  Negotiability  of 
such  a  note  is  questioned.  Opinion:  The  de- 
cisions in  different  states  conflict  upon  the 
question  of  negotiability.  There  is  nothing 
in  the  Negotiable  Instruments  Act  specifically 
relating  to  such  a  provision  which  settles  this 
conflict.  The  point  is  undecided  in  Okla- 
homa. Vol.  3,  p.  G79,  May,  1911.  But  see 
900. 

898.  (S.  Dak.)  The  following  clause 
appears  on  the  face  of  a  note:  "the  makers, 
giuirantors,  sureties  and  indorsers  of  tliis 
note  severally  waive  presentment  for  ])ay- 
mcnt,  protest,  notice  of  non-])aymcnt,  and 
diligence,  and  agree  that  time  of  payment 
may  be  extended  without  affecting  their  lia- 
bility." Opinion:  The  waiver  provisions  do 
not  destroy  the  negotiability  of  the  note,  but 
the  decisions  conflict  as  to  the  effect  upon  ne- 
gotiability of  the  provision  agreeing  t«  ex- 
tension of  time  of  payment  without  prejudice 
to  the  holder.  The  point  has  not  l)een  de- 
cided in  South  Dakota  but  cases  liolding  such 
a  note  negotiable  are  supported  by  better 
reason.     Vol.  3,  p.  467,  Feb.,  1911. 


899.  (Mo.)  In  Missouri  the  provision 
in  a  promissory  note  that  "the  makers  and  in- 
dorsers each  waive  demand,  notice  and  pro- 
test of  this  note,  and  severally  agree  that  the 
time  may  be  extended  without  notice"  does 
not  affect  its  negotiabilitv.  Vol.  10,  p.  780, 
May,  1918. 

900.  (Okla.)  A  promissory  note  con- 
taining clauses  (1)  waiving  presentment, 
(2)  consenting  to  extension  of  time  of  pay- 
ment without  notice,  (3)  providing  for  pay- 
ment of  attorney's  fees  if  not  paid  at  matur- 
ity, (4)  authorizing  confession  of  judgment 
if  not  paid  at  maturity,  and  (5)  authorizing 
sale  of  collaterals  if  not  paid  at  maturity,  is 
negotiable  under  the  law  of  Oklahoma.  Vol. 
10,  p.  781,  May,  1918. 

Instrument  payable  "in  exchange" 

901.  (Va.)  A  bank  is  offered  for  dis- 
count three  notes  payable  at  Richmond,  Vir- 
ginia "in  New  York  Exchange,"  and  ques- 
tions whether  this  phrase  makes  the  notes 
non-negotiable.  Opinion:  It  would  be  safer 
for  the  bank  to  proceed  on  the  theory  that  the 
notes  were  non-negotiable,  as  the  decisions 
conflict  upon  the  negotiabilitv  of  notes  so  pay- 
able. Vol.  8,  p.  608,  Jan.,  "1916.  See  315, 
316,  1142. 

Note  reciting  executory  consideration 

902.  (Tenn.)  A  number  of  banks  have 
purchased  notes,  concerning  whose  negotia- 
bility they  are  uncertain.  The  note  contains 
the  following  promise,  "Please  enter  my  name 
for  110  weeks'  subscription  to  (certain  pub- 
lications named),  for  which  I  promise  to  pay 
to  your  order  $5.50  six  months  from  date. 
Signed,  John  Smith."  Opinion:  Wiiore  a 
note  recites  that  it  is  given  for  a  considera- 
tion to  be  performed  in  the  future,  a  majority 
of  courts  hold  that  such  recital  does  not  affect 
negotiability  nor  prevent  the  indorsee  from 
enforcing  free  from  defen.'jes.  unless  at  the 
time  of  acquiring  the  note  he  lias  knowledge 
of  the  l)reach  of  the  executory  agreement. 
The  courts  in  a  few  states  iiohl.  to  the  con- 
trary, that  tiie  indorsee  takes  sul)jeet  to  the 
performance  of  the  cxccutnrv  ( misideralion. 
Vol.  10,  p.  314,  Oct.,  1917. 

Note  retaining  lien 

903.  (Ark.)  Negotiability  of  the  follow- 
ing note  is  questioned  :  "This  note  is  secured 
by  a  vendor's  lien  retained  on  the  (description 
of  real  estate) 


113 


001 


J)|(;kst  of  leual  oi'INIOxs 


Ian 1in7. 

On  or  beloro   after 

date  I  promise  to  pay  to  the  order  of 

$500.00  Five  Hundred 

and  no/100  Dollars  with  interest  from  date 

at  the  rate  of per  cent,  nntil  i)aid. 

\^ilue  received. 

Si<j^ned " 

Opinion:  In  most  Jurisdictions,  including  Ar- 
kansas, a  provision  in  a  note  reserving  title 
or  retaining  lien  upon  the  property  for  which 
the  note  is  given,  until  ])ayment,  does  not  de- 
stroy negotiability.  But  a  provision  that  the 
note  is  subject  to  a  certain  deed  would  make 
the  instrument  non-negotiable.  Vol.  9,  p. 
823,  April,  1917. 

Effect  of  waiver  of  protest  and  exemptions 

See   899,   900,   978 

904.  (La.)  A  note  containing  a  clause 
(1)  waiving  presentment,  (8)  waiving  ex- 
emptions and  homesteads,  and  (3)  providing 
for  costs  of  collection  and  attorney's  fees,  if 
not  paid  at  maturity,  is  a  valid  obligation  and 
is  negotiable  under  the  Negotiable  Instru- 
ments Law.  Where  the  note  contains  a 
clause  giving  '"consent  that  time  of  payment 
may  be  extended  without  notice,"  the  deci- 
sions of  a  number  of  states  conflict  as  to 
whether  or  not  it  destroys  negotiability.  Vol. 
5,  p.  173,  Sept.,  1912. 

Warehouse  receipts 

905.  (S.  Dak.)  The  agent  of  an  ele- 
vator company  borrowed  money  upon  a  forged 
elevator  storage  ticket,  which  was  issued  with- 
out authority  by  him  in  the  name  of  the 
company  to  a  fictitious  person  and  indorsed 
by  the  same  name.  The  agent  also  indorsed 
tiie  ticket  in  his  own  name.  Opinion:  The 
elevator  company  is  not  liable  to  the  pur- 
chaser. The  ticket  is  not  negotiable  and  is 
not  transferable  as  a  bearer  instrument  be- 
cause the  supposed  goods  are  made  deliverable 
to  a  fictitious  person.  The  purchaser  required 
no  title  as  in  case  of  a  negotiable 
instrument,  and  was  put  in  inquiry  in  any 
event  because  of  negotiation  by  the  issuing 
agent.     Vol.  6,  p.  819,  June,  1914. 


Warrant  drawn  for  municipal  debt 

906.  (N.  M.)  Tlie  general  rule  is  that 
warrants,  drafts  or  orders  drawn  for  payment 
of  municii)al  debts  by  one  i)ublic  ollice  on  an- 
other are  not  negotiable  instruments,  and  this 
class  of  instruments  includes  school  district 
warrants.  Vol.  G,  p.  507,  Jan.,  1914.  See 
1140. 


Words  affecting  negotiability 
See  277,  324,  899,  1289 

907.  (Minn.)  A  note  contained  the  pro- 
vision :  "this  note  is  given  for  six  drain  heads 
to  be  delivered  in  good  condition  at  (name  of 
place)."  The  note  was  negotiated  to  a  pur- 
chaser for  value.  The  drain  heads  were  never 
delivered.  Opinion:  The  holder  can  enforce 
against  the  maker,  because  the  note  is  nego- 
tiable. The  provision  above  quoted  is  a 
statement  of  the  transaction  which  gives  rise 
to  the  instrument  and  the  fact  that  it  is  an 
executory  contract  which  may  never  be  per- 
formed does  not  make  the  promise  to  pay 
conditional,  nor  destrov  negotiabilitv.  Vol. 
7,  p.  222,  Oct.,  1914. 

908.  (Okla.)  A  promissory  note  to  pav 
$5,000  had  the  following  clause  added,  "The 
foregoing  note  is  made  and  delivered  in  pur- 
suance of  the  escrow  agreement  between  John 
Smith  and  John  Brown,  dated  the  31st  day 
of  May,  1917."  Does  the  clause  affect  the  ne- 
gotiability of  the  instrument?  Opinion:  A 
note  promising  to  pay  the  amount  "in  pur- 
suance of  escrow  agreement"  between  A  and 
B  would  probably  be  held  negotiable  on  the 
ground  that  the  quoted  phrase  was  a  mere 
statement  of  the  transaction  giving  rise  to  the 
instrument  rather  than  one  making  payment 
subject  to  the  terms  of  the  escrow  agreement. 
Yoi.  10,  p.  780,  May,  1918. 

909.  (S.  Dak.)  The  words  "duplicate 
unpaid"  do  not  affect  the  negotiability  of  a 
draft  but  they  constitute  notice  to  the  pur- 
chaser of  the  existence  of  a  second  draft,  pay- 
ment of  which  would  discharge  the  draft  he  is 
buying.  Vol.  4,  p.  491,  Feb..''l912.     See  827. 


NOTARIES 


The  law  advocated  by  the  American  Bankers 
Association  relating  to  competency  of  bank  and 
corporation  notaries  has  lieen  passed  either  in 
full  or  with  modifications  in  the  following 
states:  Delaware,  Kansas,  Maine,  Michigan,  ;Min- 
nesota,  Mississippi,  Montana,  Nevada,  New 
Jersey,  New  York,  (examine  revised  code  of  North 


Dakota,     Sec.     5593)      South     Dakota,     Vermont, 
Washington,    West    Virginia,    Wyoming. 

The  law  stated  in  full  is  as  follows:  "It  shall 
be  lawful  for  any  notary  public  who  is  a  stock- 
holder, director,  officer  or  employe  of  a  l)ank  or 
other  corporation  to  take  the  acknowledgment 
of  any  party  to  any  written  instrument  executed 


114 


NOTARIES 


923 


to  or  by  such  corporation  or  to  administer  an 
oath  to  any  other  stockholder,  director,  officer, 
employe  or  agent  of  such  corporation,  or  to  pro- 
test for  non-acceptance  or  non-payment  bills  of 
exchange,  drafts,  checks,  notes  and  other  nego- 
tiable instruments  which  may  l)e  owned  or  held 
for  collection  In'  such  corporation:  Provided,  it 
shall  be  luihiwful  for  any  notary  public  to  take 
the  acknowledgment  of  an  instrument  by  or  to 
a  bank  or  other  corporation  of  which  he  is  a 
stockholder,  director,  officer,  or  employe,  where 
such  notary  is  a  party  to  such  instrument,  either 
individually  or  as  a  representative  of  such  cor- 
l)oration,  or  to  protest  any  negotiable  instrument 
owned  or  lield  for  collection  Ijy  such  corporation, 
where  such  notary  is  individually  a  party  to 
such  instrument." 

Acknowledgment  by  party  in  interest 

910.  (Miss.)  A  Mayor  of  a  city,  author- 
ized to  take  acknowledgments,  is  disqiialitied 
to  take  the  acknowledgment  of  the  grantor  to 
a  deed  of  trust  in  which  he  is  named  as 
trustee.     Vol.  9,  p.  824,  April,  1917. 

Acknowledgment  over  telephone 

911.  (Wash.)  Opinion  that  acknowl- 
edgment of  mortgage  or  other  instrument 
taken  by  notary  over  telephone  would  be 
invalid  as  law  requires  personal  (physical) 
appearance  of  person  making  acknowledg- 
ment.    Vol.  7,  p.  686,  March,  1915. 

912.  (W.  V.)  An  acknowledgment 
taken  by  a  notary  over  the  telephone  where 
the  statute  requires  a  certificate  that  the  per- 
son "personally  appeared"  before  the  notary 
has  been  held  invalid  in  several  states;  but 
in  California  its  validity  has  been  upheld  in 
the  absence  of  fraud,  duress  or  mistake. 
Question  not  decided  in  West  Virginia.  Vol. 
9,  p.  659,  Feb.,  1917. 

Notary's  fee  in  Alabama 

913.  (Ala.)  A  fee  of  $5.11  charged  by 
a  notary  in  Alabama  for  protesting  a  check  is 
excessive  and  is  in  violation  of  Section  5174 
of  the  Alabama  Code.  Vol.  10,  p.  852,  June, 
1918. 

Competency    of    bank    officers,    directors, 
stockholders  and  employees  as  notaries 

914.  (Ala.)  In  Alabama,  notary  who  is 
stockholder  of  mortgagee  hank  is  incompetent 
to  take  acknowledgment  of  mortgage,  but 
where  he  is  an  officer  or  employee,  not  a 
stockholder,  he  is  competent.  Question  of 
notary's  competency  to  protest  paper  for  the 
bank  undecided.     Vol.  4,  p.  615,  April,  1912. 


915.  (Cal.)  A  notary  public  who  is  as- 
sistant cashier  and  stockholder  of  a  bank  is 
not,  under  the  law  of  California,  disqualified 
to  take  the  acknowledgment  of  the  mort- 
gagors to  a  mortgage  executed  to  the  bank. 
Vol.  11,  p.  441,  Feb.,  1919. 

916.  (Cal.)  In  California,  notary  who 
is  stockholder  is  incompetent  to  take  acknowl- 
edgments of  instrument's  running  to  the 
bank,  although  competent  to  acknowledge  in- 
struments executed  by  the  Ijank.  But  may 
acknowledge  paper  running  to  the  bank  where 
he  is  an  otlicer  but  not  a  stockholder.  Vol.  4, 
p.  551,  March,  1913. 

XoTE:  In  1914,  Supreme  Court  of  California 
held  notary  competent,  thougii  stockholder,  to 
take  acknowledgments  of  instruments  running 
to   bank.     First   Nat.   Bank   r.   Merrill,    i:J'J   Pac 

lOGG. 

917.  (Cal.)  An  assistant  cashier  of  a 
national  bank  in  California  is  competent,  as 
notary,  to  protest  i)aper  for  the  bank,  where 
he  is  not  a  stockholder  of  the  institution.  Vol. 
4,  p.  489,  Feb.,  1912. 

Kote:   See  previous  note. 

918.  (Colo.)  A  notary  in  Colorado  is 
competent  to  take  acknowledgment  of  instru- 
ments running  to  a  bank,  although  he  is  a 
stockholder  thereof.  Vol.  8,  p.  42.  Julv. 
1915. 

919.  (Colo.)  ]\rany  states,  where  law 
unchanged  by  statute,  hold  stockholder  of 
bank  disqualified  to  act  as  notary  in  taking 
acknowledgments  of  instruments  running  to 
bank.     Vol.  7,  p.  688,  March,  1915. 

920.  (Idaho.)  In  Idaho  a  notary  who  is 
an  otlicer  but  not  a  stockholder  is  probably 
competent  to  take  acknowledgments  of  instru- 
ments running  to  his  bank.  Vol.  4,  p.  683, 
May,  1912. 

921.  (Idaho.)  Stockholder  of  bank  gen- 
erally held  by  courts  disqualified,  as  notary, 
to  take  acknowledgments  of  instruments  run- 
ning to  bank.  In  Idaho  where  question  not 
decided,  safer  to  follow  this  rule.  Vol.  4,  p. 
428,  Jan.,  1912. 

922.  (111.)  Opinion  that  notary  of  bank 
in  Illinois  who  is  an  officer  of  the  bank,  but 
has  no  stock  interest  therein,  is  competent  to 
protest  paper  owned  bv  the  bank.  Vol.  7, 
p.  166,  Sept.,  1914. 

923.  (111.)  By  statute  in  Illinois,  a  no- 
tary who  is  a  stockholder  or  officer  of  a  bank 
is  competent  to  take  acknowledgments  of  in- 
struments relating  to  real  estate  to  which  the 
bank  is  a  party.     Vol.  4,  p.  683,  May,  1912. 


115 


924 


DIGEST  OF  LEGAL  OriNJONS 


XoTE:  Sep  Miixwcll  r.  Lincoln  Builditif;  &  Loan 
Assn.,  210  III.  f^f)  lioldinp  statute  Milld  and  con- 
stitutional. Statute,  liowcvcr,  covers  (jiily  deeds 
and  niortgaffes  of  real  estate.  It  cliangca  law  as 
held  in  Og(len  Buildinj^  &  Loan  Assn.  v.  Meuscli, 
11X5  111.  554  which  held  that  acknowledgment  of  a 
mortgage  taken  before  a  notary  who  is  stock- 
holder of  the  mortgagee  is  invalid  In-cause  of  the 
notary's  pecuniary  interest.  The  statute  does  not 
cover  chattel  mortgages  and  tlie  r\ile  as  to  the 
competency  of  notary-stockholder  to  take  ack- 
nowledgment of  chattel  mortgage  to  l)ank  re- 
mains uncertain. 

924.  (111.)  In  Illinois,  question  whether 
notary  who  is  partner  of  private  bank  compe- 
tent to  protest  checks  drawn  on  bank  not  de- 
cided and  uncertain.  Vol.  4,  p.  616,  April, 
1912. 

925.  (111.)  In  the  absence  of  judicial  de- 
cision in  Illinois  a  notary-stockholder  of  a 
bank  is  competent  to  protest  paper  held  by  the 
bank  as  collection  agent,  and,  wiien  held  by 
the  bank  as  owner,  it  is  probable  that  such 
notary  is  likewise  competent  to  protest.  Vol. 
4,  p.  92,  Aug.,  1911. 

926.  (111.)  Under  law  of  Illinois,  stock- 
holder of  corporation  is  disqualified,  as 
notary,  to  tack  acknowledgments  of  deeds 
running  to  the  corj^oration — enactment  of 
remedial  legislation  suggested.  Vol.  2,  p.  23, 
July,  1909. 

Note:  Law  changed.     See  note  imder  923. 

927.  (Ind.)  By  statute  in  Indiana  a  no- 
tary public  who  is  an  officer  or  employee  of  a 
bank  or  trust  company  cannot  act  as  notary 
in  the  business  of  the  bank.  Vol.  7,  p.  104, 
Aug.,  1914. 

928.  (Ind.)  Under  Indiana  statute,  no- 
tary who  is  officer  of  bank  is  prohibited  from 
protesting  paper  running  to  bank  or  other- 
wise acting  as  notary  in  the  business  of  the 
institution.     Vol.  4,  p.  550,  March,  1912. 

929.  (Iowa.)  In  Iowa  officer  of  a  bank 
not  a  stockholder  is  competent  to  take  ac- 
knowledgments of  instruments  whether  exe- 
cuted by  or  running  to  the  bank.  Vol.  7,  p. 
779,  April,  1915. 

930.  (Iowa.)  Under  decisions  in  Iowa, 
stockholder  of  bank  is  incompetent,  as  notary, 
to  take  acknowledgments  of  instruments  run- 
ning to  bank,  but  if  notary  is  officer  and  not 
stockholder,  he  is  not  disqualified.  Vol.  7,  p. 
166,  Sept.,  1914. 

931.  (Kan.)  In  Kansas,  cashier  and 
stockholder  of  Xational  Bank  is  competent 
as  notary  to  take  acknowledgments  of  instru- 
ments running  to  the  bank.     Taking  fee  as 


notary  would  not  violate  Federal  Reserve  Act. 
\'ol.  7,  p.  1002,  June,  1915. 

932.  (Kan.)  In  Kansas  the  statute  of 
1905  authorizes  a  notary-stockholder  to  take 
acknowledgments  of  instruments  executed  to 
his  bank  except  "when  acting  himself  in  be- 
Iialf  of  the  corf)oration."  Where  a  notary 
draws  up  a  mortgage  for  })ank,  and  his  name 
is  not  mentioned  in  the  papers,  it  seems  un- 
reasonable to  hold  that  he  is  acting  himself 
in  behalf  of  the  bank.  The  Kansas  statute 
does  not  require  an  affidavit  of  ownership 
upon  the  original  filing  of  a  chattel  mortgage, 
but  such  affidavit  is  necessary  for  a  renewal. 
Vol.  4,  p.  616,  April,  1912. 

933.  (Kan.)  In  Kansas  a  notary, 
though  a  stockholder,  officer  or  employee  of 
a  bank,  is  competent  to  take  acknowledgments 
of  instruments  executed  to  and  by  such  bank, 
except  where  he  acts  for  himself  in  behalf  of 
such  bank.     Vol.  4,  p.  489,  Feb.,  1912. 

934.  (Kan.)  In  Kansas  a  notary  who  is 
an  officer  and  stockholder  of  a  bank  is  com- 
petent to  protest  the  bank's  paper  as  well  as 
take  acknowledgments  of  real  estate  mort- 
gages to  the  bank,  except  where  he  himself 
acts  in  behalf  of  the  ))ank  in  taking  the  mort- 
gage.    Vol.  4,  p.  308,  Nov.,  1911. 

935.  (La.)  Notary  who  is  stockholder 
probably  incompetent  to  take  acknowledg- 
ments of  instruments  running  to  the  bank, 
although  disqualification  may  not  extend  to 
protests.  Officer,  not  a  stockholder,  is  com- 
petent.    Vol.  5,  p.  21,  July,  1912. 

936.  (La.)  A  notary  when  a  stockholder 
of  a  bank  is  generally  held  incompetent  to 
take  acknowlegments  of  instruments  running 
to  the  bank.  The  law  is  uncertain  as  to  com- 
petency to  protest  paper.  These  questions 
have  not  been  passed  upon  in  Louisiana.  Vol. 
2,  p.  74,  Aug.,  1909. 

937.  (Minn.)  In  Minnesota  a  notary 
who  is  a  stockholder  and  officer  of  a  bank  is 
competent  to  take  acknowledgments  and  make 
protests  of  paper  in  which  the  bank  is  inter- 
ested.    Vol.  4,  p.  683,  May,  1912. 

938.  (Miss.)  Xotary  who  is  stockholder 
of  bank  probably  incompetent,  in  Mississippi, 
to  take  acknowledgment  of  deed  of  trust 
wherein  bank  is  beneficiary,  but  not  incom- 
petent wli£re  bank  is  grantor  of  a  deed.  In 
case  where  notary  is  officer,  but  has  no  stock 
interest,  competencv  probably  not  affected. 
Vol.  6,  p.  760,  May.'l914. 

939.  (Miss.)  In  Mississippi  a  notary  is 
competent  to  protest  checks  drawn  on  the 


116 


NOTAEIES 


955 


bank  of  which  he  is  an  officer  and  stockholder. 
But  probably  is  incompetent  to  acknowledge 
instruments  running  to  the  bank.  Vol.  4,  p. 
552,  March,  1912. 

940.  (Miss.)  In  Mississippi  a  notary 
who  is  a  stockholder  of  a  bank  is  presumably 
incompetent  to  take  the  acknowledgment 
of  an  instrument  running  to  the  bank.  Such 
notary  would  be  competent  to  make  protests 
of  instruments  held  by  the  bank  for  collec- 
tion, but  when  held  by  the  bank  as  owner  the 
question  of  competency  is  unsettled.  Vol.  4, 
p.  428,  Jan.,  1912. 

941.  (Mo.)  In  Missouri  a  notary  who 
is  a  stockholder  would  probably  be  held  in- 
competent to  take  acknowledgments  of  instru- 
ments running  to  his  bank.  Vol.  4,  p.  552, 
March,  1912. 

942.  (Mo.)  Under  the  existing  condi- 
tion of  the  law  in  Missouri,  a  bank  would  be 
safe  in  using  its  notary  for  protests  and  ac- 
knowledgments, where  such  notary  is  a  non- 
stockholding  officer,  but  not  when  he  is  a 
stockholder.     Vol.  3,  p.  202,  Oct.,  1910. 

943.  (Mont.)  A  statute  in  Montana 
qualifies  notaries  who  are  stockholders  of 
banks  to  take  acknowledgments  and  make 
protests  of  paper  in  which  the  bank  is  inter- 
ested.    Vol.  4,  p.  154,  Sept.,  1911. 

944.  (Neb.)  Notary  who  is  stockholder 
not  competent  to  take  acknowledgments  of  in- 
struments running  to  the  bank.  But  officer 
who  is  not  stockholder  is  competent.  A^ol.  5, 
p.  24,  July,  1912. 

945.  (N,  H.)  In  the  absence  of  any  es- 
tablished rule  in  New  Hampshire,  a  notary, 
who  is  a  director  of  a  bank,  is  competent  to 
protest  paper  held  by  the  bank  for  collection, 
but  when  the  paper  is  owned  by  the  bank  tlie 
question  is  unsettled.  Vol.  4,  p.  376,  Dec, 
1911. 

946.  (N.  J.)  In  New  Jersey  a  Commis- 
sioner of  Deeds  is  competent  to  take  the  ac- 
knowledgment to  a  mortgage  to  a  l)ank  of 
which  he  is  cashier,  director  and  stockholder. 
Vol.  4,  p.  fi84.  May,  1912. 

947.  (N.  C.)  In  North  Carolina,  no- 
tary who  is  an  officer  of  a  bank,  l)ut  not  a 
stockholder,  is  competent  to  take  acknowl- 
edgments of  instruments  running  to  a  bank. 
If  officer  is  a  stockholder  he  is  discjualified. 
Vol.  7,  p.  899,  May,  1915. 

948.  (N.  Dak.)  A  statute  in  North  Da- 
kota expressly  provides  that  the  acknowledg- 
ment of  an  instrument  to  which  a  corporation 


may  be  a  party  before  a  notary  or  other  au- 
thorized official  is  valid,  though  such  notary 
be  an  officer,  director,  employee  or  stock- 
holder of  such  corporation.  Vol,  2,  p.  108, 
Sept.,  1909. 

949.  (Ohio.)  A  statute  in  Ohio  prohib- 
iting a  director,  officer  or  clerk  of  a  bank  from 
acting  as  a  notary  in  any  matter  in  which  the 
bank  "is  in  any  way  interested"  does  not  dis- 
qualify a  stockholder  holding  no  official  rela- 
tion from  taking  acknowledgments  or  making 
protests,  but  a  director  who  is  a  notary  can- 
not protest  paper  owned  by  the  bank.  Whether 
a  director-notary  can  protest  paper  held  for 
collection  is  doubtful.  Vol.  8,  p.  CIO,  Jan., 
191G. 

950.  (Okla.)  In  Oklahoma  a  notary  is 
prol)ably  competent  to  acknowledge  instru- 
ments to  and  from  a  bank  or  to  protest  the 
bank's  paper,  although  a  stockholder  of  such 
bank  or  holding  other  official  relation.  Vol. 
4,  p.  683,  May,  1912. 

951.  (Pa.)  Opinion:  Under  the  Act  of 
1909  a  bank  clerk  would  be  competent,  as 
notar)',  to  take  acknowledgments  of  instru- 
ments executed  by  or  running  to  the  bank. 
The  competency  of  a  stockholder  to  take  ac- 
knowledgments, as  notary,  of  instnnuents 
running  to  the  bank  would  depend  on  whether 
he  is  disqualified  by  his  stock  interest,  which 
has  not  been  decidecj  in  Pennsylvania.  A 
stockholder  other  than  a  director  would  be 
competent  to  make  protests.  Vol.  4,  p.  758, 
June,  1912. 

952.  (Pa.)  A  Pennsylvania  statute  pro- 
hibits directors  of  banks  from  acting  as  no- 
tary for  the  bank.  Opinion  that  this  statute 
disqualifies  a  notary  who  is  a  director  of  a 
national  bank  from  protesting  a  check  for 
his  own  bank.     Vol.  4,  p.  307,  Nov.,  1911. 

953.  (S.  Dak.)  In  South  Dakota  no- 
tary who  is  stockhohltr  and  director  is  com- 
petent to  take  acknowledgement  of  mortgage 
executed  to  bank.  Vol.  7,  p.  1001,  June. 
1915. 

954.  (Tenn.)     The  courts  of  Tennessee 

disapprove  acknowledgments  of  instrument,*? 
running  to  bank  by  a  notary  who  is  a  stock- 
holder of  bank,  but  hold  that  such  acknowl- 
edgments arc  not  void  but  merely  voidable 
upon  proof  of  fraud,  oppression  or  other 
ground  for  invalidation.  Vol.  2,  p.  107, 
Sept.,  1909. 

955.  (Wash.)  In  Washington  notary 
public  who  is  stockholder  of  corporation  has 
been  held  competent  to  take  acknowledgment' 


117 


950 


DKIKST  OF  LEGAL  OPINIONS 


of  mortgages  running  to  his  institution. 
rroI)ably  also  coni])otent  to  protest  bank's 
paper.    "A'oI.  4,  p.  428,  Jan.,  1912. 

956.  (W.  Va.)  In  absence  of  judicial 
decision  a  notary  in  West  Virginia  wlio  is  a 
stockholder  and  director  is  competent  to  pro- 
test paper  held  by  the  bank  for  collection. 
When  held  by  the  bank  as  owner  the  question 
is  uncertain.     Vol.  4,  p.  154,  Sept.,  1911. 

957.  (Wis.)  Cashier  of  Wisconsin  bank 
who  is  notary  but  not  a  stockholder,  compe- 
tent to  take  acknowledgments  of  instruments 
running  to  the  bank.  If  casiliier  also  a 
stockholder,  this  fact  would  probably  disqual- 
ify him.     Vol.  7,  p.  900,  May,  1915. 

Relationship  to  mortgagee 

958.  (Neb.)  B  and  his  wife  executed  a 
mortgage  to  A.     A's  brother  having  no  pe- 


cuniary interest  in  the  transaction  took  the 
acknowledgments  as  notary  public.  Opinion: 
The  relationship  of  the  notary  to  the  mort- 
gagee did  not  disqualify  the  notary  and  the 
acknowledgment  is  valid.  Vol.  8,  p.  418, 
Nov.,  1915. 

Form  of  acknowledgment 

959.  (Cal.)  A  notary  public  in  making 
out  an  acknowledgment  to  a  deed  used  the 
words  "and  has  duly  acknowledged  to  me" 
etc.,  instead  of  "and  he  duly  acknowledged  to 
me"  etc.  Opinion:  Where  the  statute,  as  in 
the  case  in  California  requires  that  a  certifi- 
cate of  acknowledgment  must  be  substantial- 
ly in  a  form  therein  provided,  the  certificate 
will  be  valid  though  not  in  the  precise  lan- 
guage of  the  statute  if  it  substantially  com- 
plies therewith.     Vol.  7,  p.  102,  Aug.,  1914. 


NOTES 


Blank  space  filled  in  "in  accordance 
with  authority" 

960.  (W.  Va.)  B  and  C  signed  a  note 
in  blank  with  A  as  principal  maker,  author- 
izing A  to  fill  in  the  note  for  $100.  A,  in 
violation  of  the  agreement,  borrowed  $2,500 
from  a  bank  upon  the  note,  and  the  bank  fills 
in  that  amount.  Upon  default  of  A,  the 
bank  seeks  to  recover  from  B  and  C,  who 
claim  their  liability  is  only  for  $100.  Opin- 
ion: The  bank  was  put  on  inquiry  as  to  the 
extent  of  the  authority  of  A  and  cannot  re- 
cover from  the  accommodation  makers  the 
full  face  value  of  the  note,  but  only  the 
amount  authorized.  Section  14  of  the  Nego- 
tiable Instruments  Act  provides  that  the 
blank  must  be  filled  up  "strictly  in  accordance 
with  the  authority  given,"  and  when  the  bank 
received  the  note  in  that  condition,  it  was 
put  on  notice  that  it  must  proceed  at  its 
peril.    A^ol.  11,  p.  437,  Feb.,  1919.    See  890. 

Cashier  buying  his  own  note  for  bank 

961.  (Tenn.)  The  cashier  of  a  bank 
gave  his  ow^n  two  year  note  for  a  personal  in- 
debtedness to  John  Doe,  and  then  used  the 
bank's  funds  to  buy  the  note,  which  con- 
tained a  guaranty  of  payment  by  John  Doe. 
The  cashier  died  almost  six  years  after  the 
maturity  of  the  note,  which  had  never  been 
paid,  and  the  bank  seeks  to  hold  Doe  liable. 
Opinion:  John  Doe  would  be  held  liable  to 
the  bank  on  his  guaranty  of  payment,  which 
right   could   be   enforced   within   six   years 


after  the  date  of  maturity  of  the  note.  Upon 
the  question  whether  Doe  could  be  held  upon 
the  note  as  participant  in  a  breach  of  trust, 
it  is  likely  that  the  discount  of  the  note  by 
the  bank  for  Doe  with  his  personal  guaranty 
thereon,  especially  as  Doe  was  an  innocent 
party  free  from  actual  fault,  would  be  held  a 
sufficiently  legitimate  transaction  to  make 
him  not  chargeable  as  constructive  trustee. 
Vol.  6,  p.  509,  Jan.,  1914. 

Days  of  grace  abolished 

962.  (Miss.)  The  Negotiable  Instru- 
ments Act  of  Mississippi,  which  abolished  the 
three  daj's  of  grace  formerly  allowed,  would 
not  affect  the  terms  of  a  contract  entered  into 
liefore  the  Act  took  effect.  A  note  executed 
before  but  not  due  until  after  the  Act  became 
operative  would  carry  three  days  of  grace  in 
time  of  payment.     Vol.  9,  p.  145,  Aug.,  1916. 

Extension  of  time  of  payment 

See   772,   773,   896   et  seq.   1005 

963.  (111.)  A  note  contained  the  follow- 
ing words :  "The  joint  signers  agree  to  waive 
any  extension  of  time  without  notice."  Opin- 
ion: Such  clause  constitutes  an  express  con- 
sent by  the  surety-makers  to  the  extension. 
But  even  though  consent  were  not  given  by 
the  surety-makers  they  are  primarily  liable 
under  the  Negotiable  Instruments  Act,  and 
ar6  not  released  bv  the  extension.  Vol.  9, 
p.  48,  July,  1916.  " 


118 


NOTES 


970 


964.  (N.  Y.)  A  bank  purchased  a  note 
made  by  Smith,  payable  to  Jones's  wife,  in- 
dorsed both  by  her  and  Jones.  At  maturity 
it  is  protested  for  non-payment  and  the  in- 
dorsers  regularly  notified.  Two  years  later 
Jones  agrees  with  the  holder  to  make  weekly 
payments  of  $10  each.  The  bank  asks  if 
agreement  will  affect  the  wife's  liability. 
Opinion:  An  agreement  by  the  holder  of  a 
protested  note  with  the  last  indorser  to  ac- 
cept payment  by  weekly  installments  does  not 
discharge  a  prior  indorser  from  liability.  Had 
the  agreement  been  made  l)y  the  liolder 
with  the  maker  the  wife  would  have  been  re- 
leased.    Vol.  10,  p.  464,  Dec,  1917. 

965.  (Okla.)  A  note  contains  a  waiver 
of  protest  and  extension  clause  providing  that 
"after  maturity,  the  time  of  payment  may  be 
extended"  etc.,  so  worded  to  remove  any  ques- 
tion of  negotiability  of  note.  The  question 
arises  whether,  if  a  bank  extends  the  note  be- 
fore maturity,  the  other  makers  and  indorsers 
would  be  released.  Opinion :  The  consent  to 
extension  only  applies  when  made  after  ma- 
turity, and  extension  by  the  holder  to  the 
principal  debtor  before  maturity  would  re- 
lease the  sureties,  except  those  who  signed  on 
the  face  as  makers.  Vol.  8,  p.  420,  Xov., 
1915. 

966.  (Okla.)  A's  note  for  $1,000  was 
indorsed  by  B  and  C  who  guaranteed  pay- 
ment. The  holder  extended  the  time  of 
payment  on  the  note  in  consideration  for  A's 
payment  of  30  days'  interest  in  advance. 
Opinion:  The  extension  of  the  time  of  pay- 
ment by  the  holder  without  the  consent  of 
B  and  C  released  them  from  liability.  If 
B  and  C  had  signed  the  note  as  surety-makers 
they  would  not  have  been  released  from  liabil- 
itv  under  the  Xegotial)le  Instruments  Law. 
Vol.  4,  p.  9:3,  Aug.,  1911. 

967.  (Tenn.)  A's  note  in  payment  of  a 
loan  was  signed  on  its  face  by  B  and  C. 
There  was  no  waiver  of  demand  and  protest. 
After  maturity  A  upon  a  forged  order  pur- 
porting to  be  signed  by  B  and  C  obtained  an 
extension  of  the  time  of  payment,  wliich  was 
duly  granted  by  the  holder.  B  and  C  con- 
test liability  because  as  indorsors  they  were 
discharged  for  failure  to  protest  the  note,  and 
because  of  the  extension  agreement  given 
without  their  consent.  Opinion:  B  and  C 
signed  as  makers  and  were  not  entitled  to 
protest,  and  under  the  Xegotiable  Instru- 
ments Act  the  surety-makers  of  a  note  are 
primarily  liable  and  are  not  discharged  l)y 


the  extension  of  the  time  of  payment  granted 
to  the  principal  maker  without  their  consent. 
\o\.  9,  p.  147,  Aug.,  191G. 

968.  (Tenn.)  A  joint  and  .several  note 
of  *1.jO  was  executed  by  two  makers,  one  of 
whom  was  a  surety.  $T5  was  paid  on  the 
note  after  maturity,  in  consideration  of  which 
an  extension  of  time  was  given  the  principal 
maker  to  pay  the  balance.  The  priucijial 
maker  did  not  pay  as  agreed  and  became  in- 
solvent. Opinion:  The  surety  was  not  re- 
leased by  such  extension  of  time  because  (1) 
the  agreement  was  not  binding,  being  with- 
out valid  consideration,  and  even  if  other- 
wise, (2)  under  the  Xegotiable  Instrument- 
Act  a  surety-maker  is  not  discharged  by  tiie 
extension  given  the  principal  maker  witiiout 
his  consent.  The  Statute  of  Limitations 
(five  years  in  Kentucky,  where  the  note  was 
made)  begins  to  run  from  the  date  of  nia- 
turitv  of  the  note.  Vol.  7,  p.  103,  Aug., 
1914'. 


Enforcement  of  note  by  holder 

969.  (La.)  X  gives  his  note  i<>r 
•S?00  to  Bank  A  for  borrowed  money; 
Bank  A  indorses  same  and  pledges  to  Bank  B 
as  collateral  for  a  note.  Afterwards  X  pays 
Bank  A  $100  on  the  note  and  takes  cashier's 
receipt  for  same.  Bank  .\  does  not  advise 
Bank  B  to  make  proper  credit  on  note.  Bank 
A  becomes  insolvent.  Opinion:  Assuming 
the  note  was  transferred  by  Bank  A  to  Bank 
B  before  maturity,  the  paynjent  l)y  the  maker 
to  Bank  A  was  inelTective  against  Bank  B, 
which  can  recover  the  full  amount  of  the  note 
from  the  maker,  or  so  much  thereof  as  is  nec- 
essary to  satisfy  the  lien.  Vol.  8.  p.  147, 
Aug."  1915. 

970.  (Md.)  A  bank  discounted  for  its 
customer  three  notes,  the  proeeetis  of  which 
were  credited  to  the  indorser's  account.  At 
maturity  of  the  notes  payment  was  refused  by 
tiie  makers,  who  claimed  fraud.  The  in- 
dorser cliecked  out  the  credit  he  had  received 
from  the  bank,  hut  has  a  de|>osit  with  the 
hank  sutlicient  to  meet  the  notes.  Opinion: 
Tlie  bank  at  maturity  of  the  notes  can  enforce 
payment  of  the  nuikers  free  from  the  defen.se 
of  fraud  in  procurement,  provided  the  pro- 
ceeds credited  to  the  indorser  were  withdrawn 
prior  to  maturity.  The  bank  is  not  obliged 
to  apply  a  sutlicient  deposit  of  the  indorser  in 
."Satisfaction  of  the  notes,  in  preference  to 
suing  the  makers.     Vol.  8,  p.  706,  Feb.,  1910. 


110 


971 


DIGEST  OF  LEGAL  OPINIONS 


971.  (Mich.)  A  gave  B  in  part  pay- 
ment fur  real  estate  two  time  notes  bearing 
interest  at  the  rate  of  six  per  cent.  On  A's 
default  at  maturity  B  wrote  A  that  he  would 
charge  7  per  cent.,  because  the  payments  were 
not  met  when  due.  A  did  not  respond  to 
the  letter.  B  seeks  to  enforce  the  payment 
of  seven  per  cent,  interest,  and  until  such 
payment  refuses  to  give  A  a  deed.  The 
agreement  was  that  deed  should  be  delivered 
when  notes  were  paid.  Opinion:  B  has  no 
right  to  enforce  payment  of  seven  per  cent, 
interest,  because  there  was  no  binding  agree- 
u\Qi\t  between  A  and  B  changing  the  original 
contract,  and  has  no  right  to  refuse  deed 
when  balance  of  principal  and  six  per  cent, 
interest  are  tendered.  Under  the  laws  of 
Michigan  it  is  lawful  to  contract  for  a  seven 
per  cent.  rate.     Vol.  4,  p.  375,  Dec,  1911. 

972.  (Miss.)  The  maker  and  indorser 
of  a  note  having  become  liable  thereon,  the 
holder  desires  to  know  which  to  sue  first  to 
recover  the  money.  Opinion:  Under  the  law 
merchant,  the  holder  of  an  indorsed  instru- 
ment upon  which  the  indorser  has  been  duly 
charged,  can  sue  both  maker  and  indorser  in 
separate  actions  at  the  same  time  or  either,  at 
his  election,  but  cannot  join  both  in  the  same 
action  in  the  absence  of  statutes  authorizing 
such  joinder,  which  have  been  passed  in  many 
states.  Negotiable  Instruments  Act  does  not 
alter  the  rules  as  to  remedy  "by  suit.  The 
Code  of  Mississippi  denies  the  right  of  sep- 
arate action  against  indorser  where  the  maker 
is  a  resident  of  the  state  and  requires  joinder 
of  maker  and  indorser  in  the  same  action. 
Vol.  10,  p.  122,  Aug.,  1917. 

Governed  by  law  of  place  where  payable 

973.  (111.)  Where  a  note  is  made  in  one 
state  or  jurisdiction  and  is  payable  in  another, 
the  law  of  the  place  where  payable  governs  the 
instrument.     Vol.  6,  p.  213,' Sept.,  1913. 

Note  with  impossible  date 

974.  (Ga.)  A  bank  receives  for  collec- 
tion a  note  reading  "February  30th  after  date 
I  promise  to  pay."  The  collecting  bank  in- 
quires as  to  the  liability  of  the  maker,  and 
whether  if  collection  is  made  and  the  maker 
later  discovers  the  error  in  date  and  contends 
that  it  was  collected  illegally,  the  collecting 
bank  would  be  liable.  Opinion:  The  note  is 
not  illegal  or  void,  but  is  payable  on  the  near- 
est date  of  the  same  month,  namely  February 
28.     Vol.  1,  p.  407,  May,  1909. 


Joint  and  several  notes 
Sec  092 

975.  (Ga.)  At  common  law,  a  note 
drawn  *'We  promise,"  etc.,  signed  by  two  or 
more  is  joint  only,  but  "1"  promise,  so  signed, 
is  joint  and  several.  By  statute  in  some 
states  a  joint  note  in  form  is  made  joint  and 
several.  In  absence  of  statute,  bank  desiring 
joint  and  several  note  should  have  it  read 
"We  or  either  of  us,"  or  "We  jointly  and 
severally"  promise.  Vol.  6,  p.  215,  Sept., 
1913. 

976.  (111.)  Note  reading  "I"  promise 
to  pay,  signed  by  two  or  more  makers,  is  joint 
and  several  under  the  law  merchant  and  Ne- 
gotiable Instruments  Law  and  is  a  better  form 
from  the  standpoint  of  the  holder  than  one 
reading  "we"  promise  to  pay,  which  at  com- 
mon law  is  a  joint  note  only.  Vol.  5,  p. 
109,  Aug.,  1912. 

977.  (W.  Va.)  A  note  written  "We 
promise  to  pay"  is  joint  only,  in  the  absence 
of  a  statute  making  it  joint  and  several  and 
all  the  makers  must  be  joined  in  an  action 
thereon,  but  each  maker  is  liable  for  the  full 
amount.     Vol.  6,  p.  756,  May,  1914. 

Judgment  notes 

978.  (Del.)  A  note  contains  a  clause 
confessing  judgment  if  payment  is  not  made 
at  maturity,  and  an  express  waiver  of  de- 
mand, protest  and  notice  embodied  in  the  in- 
strument itself.  Opinion:  The  note  is  valid 
and  negotiable  under  the  Negotiable  Instru- 
ments Law,  and  neither  demand  nor  notice  is 
necessarv  to  hold  indorsers.  Vol.  4,  p.  493, 
Feb.,  1912. 

979.  (Pa.)  A  form  of  note,  submitted 
on  the  question  of  negotiability,  contains  a 
stipulation  in  addition  to  the  promise  to  pay, 
that  the  maker  will  "confess  judgment  for 
the  above  sura  with  5  per  cent,  added  for  col- 
lection fees."  Opinion:  Where  a  promissory 
note  contains  a  clause  authorizing  confession 
of  judgment  without  the  restriction  "if  not 
paid  at  maturity"  so  that  thereunder  judg- 
ment may  be  entered  at  any  time,  negotiabil- 
ity of  the  note  is  destroyed.  The  Negotiable 
Instruments  Act  declares  that  negotiability 
is  not  affected  by  a  provision  which  author- 
izes confession  of  judgment  if  the  instrument 
is  not  paid  at  maturity  and  a  note  conforming 
to  this  provision  would  be  negotiable.  Vol. 
11,  p.  669,  June,  1919. 

980.  (Pa.)  A,  who  borrowed  $5,000 
from  a  bank,  executed  a  promissory  note  for 


120 


NOTES 


[989 


$5,000  and  a  judgment  note  for  a  like  sum. 
After  he  had  paid  $3,000,  he  requested  a  new 
loan  of  $3,000.  The  bank  questions  the  ad- 
visability of  taking  a  new  judgment  note  or 
of  permitting  the  old  judgment  note  to  cover 
the  old  and  new  debts.  Opinion:  The  old 
judgment  note  would  not  be  enforceable  for 
the  amount  of  the  new  loan,  and  a  new  judg- 
ment note  should  be  taken.  Vol.  9,  p.  241, 
Sept.,  1916. 

981.  (Pa.)  A  promissory  note  contains 
a  clause  empowering  any  attorney  of  record 
"to  appear  for  and  confess  judgment  for  the 
above  sum,  with  or  without  declaration,  with 
costs  of  suit,  release  of  errors,  without  stay  of 
execution.^'  Opinion:  The  provision  would 
destroy  negotiability  of  the  note,  as  there- 
under judgment  could  be  entered  up  before 
maturity.  Such  notes  were  held  non-nego- 
tiable in  Pennsylvania  before  the  Negotiable 
Instruments  Act,  and  that  act  makes  the  note 
negotiable  only  where  the  clause  authorizes 
confession  of  judgment  "if  the  instrument  be 
not  paid  at  maturitv."  Vol.  7,  p.  895,  Mav, 
1915. 

982.  (Pa.)  A  clause  in  a  note  authoriz- 
ing confession  of  judgment  "at  any  time"  de- 
stroys its  negotiability.  A  surety  consenting 
to  the  entry  of  judgment  prior  to  maturity  is 
not  discharged  by  such  entry.  Vol.  7,  p.  306, 
Nov.,  1914. 

983.  (Pa.)  When  a  note  contains  a 
judgment  clause  constituting  an  immediate 
confession  of  judgment,  upon  which  judg- 
ment could  be  entered  before  maturity,  it  is 
non-negotiable,  both  under  decisions  in  Penn- 
sylvania and  under  the  Negotiable  Instru- 
ments Act.     Vol.  4,  p.  374,  Dec,  1911. 

984.  (Pa.)  A  and  B  borrowed  $1,000 
from  S,  giving  therefor  a  note  containing 
power  to  confess  judgment,  a  seal  being  op- 
posite their  signatures  as  makers.  C  signed 
tlie  note  for  acconnnodation  only  and  no 
seal  follows  his  name.  A  and  B  liavo  as- 
signed and  C  contends  that  he  cannot  be  held 
because  his  signature  was  not  under  seal. 
Opinion:  The  validity  of  a  judgment  note  is 
not  affected  bv  the  fact  that  it  is  not  given 
under  seal.     Vol.  4,  p.  156,  Sept.,  1911. 

Liability  of  surety 

985.  (Tex.)  A  signed  a  {jroniissory  note 
in  favor  of  a  bank,  whicli  discounted  it  for 
him.  The  understanding  witli  A  was  that  B 
would  also  sign  as  surety,  but  B  was  not  pres- 
ent at  tlie  time.     Later  B  did  sign  as  surety. 


On  A's  failure  to  pay,  payment  is  sought  to 
be  enforced  against  B.  Opinion:  B's  signa- 
ture is  without  consideration  and  not  binding 
unless  made  in  pursuance  of  a  promise  made 
in  advance  of  discount.  Vol.  8,  p.  145,  Aug., 
1915.     See  67,  68,  69,  TOO.  t»82. 

Maturity  of  notes 

986.  (Miss.)  The  rule  of  the  law  mer- 
chant is  that  the  term  "month"  in  a  bill  or 
note  means  a  calendar  and  not  a  lunar  month. 
A  note  dated  January  31st  payable  in  one 
month,  fixed,  after  date,  matures  on  Febru- 
ary 28.  The  common  law  rule  is  tiiat  when 
the  date  of  maturity  falls  on  a  Sunday  or  hol- 
iday it  is  pavable  on  the  next  succeeding  bus- 
iness day,  but  if  the  instrument  carries  grace, 
it  must  be  presented  on  the  business  day  pre- 
ceding. The  due  date  of  holiday  maturing 
paper  is  now  quite  generally  regulated  bv 
statute.     Vol.  1,  p.  297,  Feb.,  1909. 

987.  (Neb.)  Under  the  law  merchant 
and  the  Negotiable  Instruments  Act,  in  com- 
puting the  time  an  instrument  lias  to  run,  the 
day  of  the  date  is  excluded  and  the  day  of  the 
payment  is  included.  A  note  dated  January 
1,  1915,  given  for  one  vear,  i<  pavable  Jan- 
uary 1,  1916,  not  December  31,  1915.  Vol. 
6,  p.  759,  May,  1914. 

988.  (N.  Y.)  A  note  dated  December 
29,  30  or  31,  payable  two  months  after  date, 
falls  due  on  February  28,  or  in  leap  year. 
February  29.  It  is  the  rule  of  the  hiw 
merchant  that  when  a  note  payal)le  one  or 
more  months  after  date  is  dated  on  a  day  of 
the  month  which  has  no  corresponding  day  in 
tlie  month  of  maturity,  the  day  of  maturity 
is  not  carried  over  to  the  following  montli 
but  falls  on  the  last  day  of  the  month  in  whicli 
it  is  i)ayablc.     Vol.  10,  p.  715,  April,  1918. 

989.  (Pa.)  A  provision  in  a  collateral 
note  authorizing  the  holder  to  demand  addi- 
tional security  from  time  to  time  and  in  de- 
fault thereof  immediately  maturing  the  note. 
destroyed  negotiability  under  the  majority  of 
earlier  decisions,  as  it  made  the  note  uncer- 
tain as  to  amount  and  time  of  payment. 
Since  the  enactment  of  the  Negotiable  Instru- 
ments Law,  the  question  of  nrgotinbility  is 
still  doubtful,  except  in  Wisconsin,  where  a 
special  provision  of  the  Negotiable  Instru- 
ment.s  Law  makes  such  a  note  negotiable,  and 
it  would  be  safer  for  a  bank  to  regard  such 
note  non-negotiable  until  the  question  is  de- 
cided. Where  such  a  note  is  held  negotiable 
and  is  indorsed,  the  question  of  precii^e  date 
{,f  maturitv.  whether  the  note  immediately 


121 


9901 


DIGEST  OF  LEGAL  OPINIONS 


matures  upon  default  or  only  at  tlic  o])tion  of 
the  holder,  is  important  (1)  as  respects  the 
rights  of  suhpcqucnt  purchasers  (2)  as  to 
charging  indorsers.  There  is  a  difference 
between  the  Wisconsin  and  federal  courts 
upon  this  question.  Vol.  2,  p.  533,  June, 
1910.     See  893,  893,  895. 

Note  collected  by  agent  without  authority 

990.  (Okla.)  The  purchaser  of  a  cream 
separator  gave  the  company  selling  the  same 
his  note  of  $60,  The  company's  agent,  who 
liad  authority  only  to  sell,  collected  payments 
on  the  note,  giving  a  receipt  therefor,  and 
did  not  account  to  his  principal.  The  com- 
pany sought  to  hold  the  purchaser  liable  on 
the  note.  Opinion:  Authority  to  the  agent 
to  sell  did  not  include  authority  to  collect  the 
note  unless  the  company  intrusted  the  agent 
with  the  possession  of  the  note.  Payment  to 
the  agent  was  at  the  purchaser's  risk,  unless 
he  can  prove  that  the  agent  had  actual  or  os- 
tensible authority  to  receive  payment  without 
having  possession  of  the  note.  Vol.  7,  p.  35, 
July,  1914.     See  671  et  seq. 

Renewals 

991.  (Fla.)  Where  there  is  a  binding 
agreement  supported  by  a  valid  consideration 
between  the  holder  and  maker  to  extend  the 
time  of  payment  of  a  note,  the  extension  is 
just  as  bincling  if  the  contract  is  evidenced  by 
indorsement  on  the  note  and  the  giving  of  a 
receipt  for  the  interest  for  the  extended  per- 
iod, as  if  a  new  note  is  taken  in  renewal.  The 
effect  of  such  an  agreement  indorsed  on  the 
note  is  to  postpone  the  holder's  right  of  action 
and  the  commencement  of  the  running  of  the 
statute  of  limitations  until  expiration  of  the 
period  for  which  extension  is  granted.  Vol. 
10,  p.  597,  Feb.,  1918. 

992.  (Mich.)  A  and  B  sign  a  joint  note 
for  $500,  due  in  three  months.  A  signed  a 
new  note  in  renewal,  but  B  being  absent  was 
unable  to  sign.  Both  notes  were  retained. 
Opinion :  The  new  note  does  not  operate  as  a 
payment  of  the  original,  but  only  as  a  sus- 
pension of  the  debt  evidenced  thereby.  Vol. 
7,  p.  997,  June,  1915. 

993.  (Pa.)  A,  B  and  C  were  makers  of 
a  note  held  by  a  bank.  The  bank,  not  wish- 
ing to  carry  the  note  as  overdue  paper,  caused 
A  and  B  to  execute  a  new  note  in  renewal  of 
the  indebtedness,  which  C,  because  of  sick- 
ness, was  unable  to  sign.  The  bank  did  not 
destroy  the  old  note  but  kept  both.  Opinion  : 
Where  a  new  note  is  given  in  renewal  of  an 
old  note  and  the  latter  is  retained,  the  weight 


of  authority  is  to  the  efTect  that  the  old  note 
is  not  extinguished  unless  the  intention  is  to 
accept  the  new  note  in  satisfaction  and  dis- 
charge of  the  first.     Vol.  6,  p.  272,  Oct.,  1913. 

994.  (Wis.)  A  gave  a  note  to  B  Corpor- 
ation for  goods  sold,  and  at  maturity  by  ar- 
rangement with  B  for  renewal  of  part  of  the 
debt,  paid  the  note  to  the  holding  bank  and 
executed  a  new  note  for  a  less  amount.  The 
B  Corporation  indorsed  and  discounted  the 
renewal  note.  Opinion :  The  transaction  con- 
stituted a  renewal  and  not  a  payment,  and 
the  new  note  is  based  on  the  same  considera- 
tion as  the  old  note.  The  indorsement  of  the 
B  Corporation  is  therefore  not  for  accommo- 
dation, and  the  bank  can  hold  the  corporation 
in  the  event  of  non-pavment  bv  the  maker. 
Vol.  8,  p.  323,  Oct.,  1915. 

Use  of  seal 
See  984 

995.  (Fla.)  A  note  is  drawn  by  the 
maker,  payable  to  his  own  order,  and  in- 
dorsed by  him  to  another.  It  provides  for 
costs  of  collection,  attorney's  fees,  and  con- 
tains provisions  waiving  the  benefit  of  certain 
laws  intended  for  the  benefit  of  the  obligors. 
A  seal  is  attached  to  the  maker's  name. 
Opinion:  The  note  is  negotiable  under  the 
Negotiable  Instruments  Law,  although  at 
common  law  the  seal  would  destrov  the  nego- 
tiability.    Vol.  4,  p.  95,  Aug.,  1911. 

996.  (Pa.)  It  is  a  well  settled  doctrine 
that  a  corporation  may  make  promissory 
notes  and  simple  contracts  without  affixing 
its  corporate  seal.  LTnder  the  law  merchant, 
the  affixing  of  a  seal  to  an  individual  note  de- 
stroyed its  negotiability  but  this  rule  was 
generally  held  not  to  apply  to  corporate  notes 
under  seal.  Under  the  Negotiable  Instru- 
ments Act  the  validity  and  negotiable  char- 
acter of  an  instrument  are  not  affected  by  the 
fact  that  it  bears  a  seal.  Vol.  5,  p.  523,  Feb., 
1913. 

997.  (Pa.)  A  seal  is  not  necessary  to 
the  validity  of  a  corporation  note,  but  the  use 
of  a  seal  does  not  affect  its  negotiability.  Un- 
less the  charter  or  governing  statute  requires 
it,  the  act  of  a  corporation  need  not  be  evi- 
denced by  its  corporate  seal,  except  where  a 
seal  would  be  required  in  the  case  of  indivi- 
duals.    Vol.  5,  p.  523,  Feb.,  1913. 

998.  (S.  C.)  At  common  law  a  note  of 
an  individual  under  seal  is  not  negotiable, 
but  under  the  Negotiable  Instruments  Act, 
the  nee:otiabilitv  is  not  destroved  bv  the  ad- 
dition of  a  seal."    Vol.  6,  p.  274,  Oct.,  1913. 


122 


NOTES 


1006 


Statute  of  Limitations  on  demand  note 

999.  (Cal.)  In  California  the  Statute  of 
Limitations  begins  to  nm  against  the  maker 
from  the  date  of  a  demand  note,  not  from  the 
date  of  its  apparent  maturity,  and  the  note 
is  outlawed  four  years  from  date.  Vol.  9,  p. 
825,  April,  1917. 

1000.  (La.)  In  Louisiana,  the  Statute 
of  Limitations  begins  to  run  from  the  date 
on  a  demand  note  and  not  from  demand, 
such  being  the  rule  in  most  other  states  and 
the  note  is  outlawed  unless  an  action  is 
brought  within  five  years  from  the  date.  Vol. 
6,  p.  757,  May,  1914. 

1001.  (N.  J.)  A  corporation  issued  its 
demand  note  in  1911,  there  being  several  in- 
dorsers  each  waiving  presentment,  demand 
and  notice  of  protest.  No  demand  upon  the 
instrument  Avas  made  until  1918.  Are  the 
indorsers  liable?  Opinion:  The  six  year  lim- 
itation provided  by  the  New  Jersey  Statute 
of  Limitations  will  not  only  bar  recovery 
from  the  makers  but  also  the  indorsers.  The 
statute  begins  to  run  from  the  date  of  the 
instrument,  whetlier  or  not  it  draws  interest. 
Vol.  11,  p.  171,  Sept.,  1918. 

1002.  (N.  Y.)  A  bank  received  as  se- 
curity for  a  loan  of  $15,000  made  to  a  fruit 
growers'  association,  thirty  demand  notes  of 
$500  each,  payable  to  the  order  of  the  asso- 
ciation. The  bank  raises  three  questions. 
First:  Should  a  place  of  payment  be  desig- 
nated in  the  notes  ?  Second  :  How  long  is  the 
demand  note  good?  and  third:  Would  a  de- 
mand note  draw  interest  where  it  contained 
no  provision  to  that  effect?  Opinion:  Tt 
would  be  preferable  as  a  matter  of  conven- 
ience to  have  the  demand  note  payable  at  the 
bank.  The  Statute  of  Limitations  begins  to 
run  \ipon  a  demand  note  from  its  date  and 
an  action  is  barred  after  six  years.  Where 
the  note  makes  no  provision  for  interest  the 
rule  in  New  York  is  that  it  does  not  draw  in- 
terest before  demand  or  commencement  of  an 
action.     Vol.  11,  p.  670,  June,  1919. 

1003.  (N.  Y.)  Under  the  Statute  of  I>im- 
itations  in  New  York  the  person  wlio  guar- 
antees payment  of  a  note  and  any  renewal  of 
the  same  is  liable  for  six  years  from  the  time 
the  cause  of  action  on  tlie  note  accrues,  which 
would  be  the  date  of  maturity  of  the  note — 
or  of  the  renewal  if  such  was  the  case.     The 


guaranty  of  payment  of  a  demand  note  would 
run  six  years  from  the  time  of  delivery.  Vol. 
4,  p.  28,  July,  1911. 

Notes  containing  words  "with  exchange" 

1004.  (Ind.)  A  note  for  .^'i.oUO  wjis 
drawn  and  made  payable  at  one  and  the  same 
place  "with  exchange,"  without  designating 
that  the  exchange  is  on  another  place.  The 
full  amount  of  the  note  was  paid  witiiout  de- 
duction. Opinion:  The  words  ''with  ex- 
change" in  the  note  were  meaningless  and  no 
exchange  charges  were  collectible  from  the 
payor  bank.  Vol.  0,  p.  701,  May,  1914.  See 
300,  3(J1,  362,  1061. 

Indorser  released  by  extension  of  time 

1005.  (Ore.)  A  gave  B  his  nt-gutialde 
promissory  note,  due  in  six  months,  jiaynient 
of  which  was  guaranteed  by  B,  who  dis- 
counted it  at  the  bank.  At  maturity  the 
bank  extended  A's  time  of  payment  thirty 
days.  The  note  also  contained  the  accom- 
modation indorsement  of  C.  Opinion:  An 
indorser  who  guarantees  payment  is  second- 
arily liable  under  the  Negotiable  Listruments 
Act  and  if  a  binding  extension  of  time  is 
granted  to  the  principal  maker  without  his 
consent  he  is  discharged  from  liability.  Under 
the  Negotiable  Listruments  Act  a  surety  who 
signs  as  maker  is  not  discharged  by  such  ex- 
tension, the  common  law  being  changed  in 
this  particular.  Vol.  9,  p.  657,  Feb.,  1917. 
See  964-967. 

Accommodation  maker  not  released  by 
extension  of  time 

1006.  (S.  Dak.)  A  note  ha.l  lioen  signed 
bv  two  jiarties.  one  who  received  tiie  money, 
the  other  acting  as  accommodation  maker. 
The  note  being  past  due,  the  payee  took  a 
new  note  from  the  first  party.  Does  the  ex- 
tension of  the  time  of  paNTnent  release  the 
accommodation  maker?  Opinion:  The  doc- 
trine of  the  hiw  of  suretyship  that  a  binding 
extension  of  time  by  the  crnlitor  to  the  prin- 
cipal debtor  releases  a  non-consenting  surety 
has,  according  to  a  number  of  authorities, 
been  abrogated  by  the  Negotiable  Instruments 
Act  where  the  surety  signs  the  instrument  as 
one  of  the  makers.  This  point  has  not  been 
decided  in  South  Dakota,  but  according  to  the 
weight  of  authority  the  accommodation 
maker  being  primarilv  liable  would  not  be  re- 
leased.    Vol.  11,  p.  213,  Oct..  1918. 


123 


1007 


NOTES  PAYABLE  AT  BANK 

For  Stoi)j)in;,^  J'iij'inout  of  iS'otes  i'liyablc  at  Jiuiik,  Suo  l2l'.)-\252 


Equivalent  to  order  to  pay  at  maturity 
See  772,  1212,   1330 

NoTK:  TIic  Ncpjotiablc  Instnimont.s  Act,  Sec.  87, 
])rovide.s:  "U'lierc  the  iiislnmiiMit  is  made  ])iiyivl)le 
at  a  bank  it  is  equivalent  to  an  order  to  tlie  l)ank 
to  pay  the  same  for  the  account  of  tlio  jirincipal 
debtor  thereon."  The  Negotiable  Instruments 
Act  has  been  passed  in  all  the  states  except 
Georgia.  As  passed  in  Illinois,  Nebraska,  and 
South  Dakota,  however,  the  above  provision  is 
omitted;  in  Kansas,  the  section,  while  originally 
enacted,  was  repealed  by  chapter  94,  Laws  of 
1915,  and  in  Minnesota  the  word  "not"  was  in- 
terpolated. In  tliose  states,  therefore,  the  bank 
is  not  authorized  or  obliged  to  pay  its  custom- 
er's note,  made  payable  at  the  bank  (as  indicated 
in  the  opinions  digested  below),  without  express 
instructions  from  him.  In  all  other  Negotiable 
Instruments  Law  states  it  is  so  authorized  and 
obliged.  In  Missouri,  the  legislature  by  amend- 
ment in  1909,  added  the  following  at  the  end  of 
the  Section :  "But  where  the  instrument  is  made 
payable  at  a  fixed  determinable  future  time,  the 
order  to  the  bank  is  limited  to  the  day  of  ma- 
turity." 

1007.  (Mo.)  Under  the  rule  of  the  Ne- 
gotiable Instruments  Law  a  man  who  makes 
his  note  payable  at  his  bank  thereby  orders 
it  to  pay  it  at  maturity  and  the  bank  is 
obliged  to  carry  out  this  order,  when  in  suffi- 
cient funds,  the  same  as  if  the  order  was  by 
check.     Vol.  3,  p.  276,  Nov.,  1910. 

1008.  (N.  C.)  Under  the  Negotiable 
Instruments  Law  it  is  probable  that  the  au- 
thority of  a  bank  to  pay  a  time  instrument, 
payable  at  the  bank,  is  limited  to  the  day  of 
maturity  only,  although  the  point  lias  not  yet 
been  passed  upon  in  this  country.  Vol.  3, 
p.  524,  March,  1911. 

1009.  (Okla.)  In  Oklahoma,  under  the 
rule  of  the  Negotiable  Instruments  Law,  a 
depositor  who  issues  his  note  payable  at  the 
bank  wherein  he  keeps  an  account,  thereby 
orders  the  bank  to  pay  the  same  at  maturity. 
It  becomes  the  duty  of  the  bank,  if  in  funds, 
to  pay  the  note,  and  the  bank  incurs  no  lia- 
bility to  the  depositor  for  so  doing,  even 
though  he  afterwards  objects  to  the  payment 
and  claims  he  had  good  reason  for  having 
payment  of  the  note  refused.  Vol.  3,  p.  336, 
Dec,  1910. 

1010.  (Pa.)  A  note  is  made  payable  at 
a  bank.  At  maturity  the  account  is  good  for 
the  amount.  No  order  has  been  given  not 
to  pay.  The  bank  inquires  whether  a  specific 
notice  must  be  given  the  bank  by  the  maker 
to  entitle  it  to  pay  the  note.  Opinion :  LTnder 
the  Negotiable  Instruments  Law  it  is  the  au- 
thority and  duty  of  a  bank  to  pay  a  customer's 


note  made  payable  at  the  bank  without  ex- 
press instructions  from  the  customer.  Vol. 
4,  p.  304,  Nov.,  1911. 

Express  instructions  to  pay 

See  425 

1011.  (Cal.)  Notes  made  payable  at  a 
California  bank,  where  the  maker  had  suffi- 
cient funds,  were  forwarded  to  the  bank  for 
collection.  The  bank  inquired  of  the  maker 
by  mail  and  telephone  whether  it  should  pay 
or  refuse  payment  but  received  no  response. 
Opinion:  The  law  in  California  is  uncertain 
whether  the  note  operates  as  an  order  or  au- 
thority to  the  bank  to  pay  and  charge  to  the 
maker's  account,  or  whether  the  bank  has  no 
right  to  do  so  in  the  absence  of  express  in- 
structions from  the  maker.  Vol.  7,  p.  383, 
Dec,  1914. 

Note:  In  1917,  California  passed  the  Nego- 
tiable Instruments  Act,  Sec.  87  of  which  (Civ. 
Code  §3168)  provides:  "Where  the  instrument  is 
made  payable  at  a  bank  it  is  equivalent  to  an 
order  to  the  bank  to  pay  the  same  for  the  account 
of  the  principal  debtor  thereon."  See  note  under 
heading  "Notes  payable  at  bank." 

1012.  (Cal.)  ^Miere  A  and  B  have  a 
joint  account  in  bank  payable  on  presenta- 
tion of  pass-book,  and  A  makes  her  individual 
note  payable  at  bank.  Opinion:  That  bank, 
holding  note  for  collection  at  maturity,  has 
no  right  to  charge  same  to  joint  account,  but 
should  protest  unless  funds  to  pay  note  are 
taken  out  of  joint  account  by  A  on  presen- 
tation of  pass-book  or  are  otherwise  provided 
by  A  for  purpose  of  meeting  the  note.  Vol. 
6,  p.  96,  Aug.,  1913. 

1013.  (111.)  In  Illinois  the  Negotiable 
Instruments  Law  omits  the  provision  'Where 
the  instrument  is  made  payable  at  a  bank  it 
is  equivalent  to  an  order  to  the  bank  to  pay 
the  same  for  the  account  of  the  principal 
debtor  thereon"  which  is  contained  in  the  uni- 
form law  of  other  states.  Under  the  judi- 
cial decisions  of  Illinois  it  would  seem  that  a 
bank  has  no  authority  to  pay  its  customer's 
note  made  payable  at  the  bank,  unless  express- 
ly ordered  to  do  so  by  its  customer,  the  note 
itself  not  constituting  such  order.  Vol.  3, 
p.  337,  Dec,  1910. 

1014.  (Minn.)  Where  customer  makes 
note  payable  at  bank  it  is  bank's  duty,  under 
Negotiable  Instruments  Act,  to  pay  and 
charge  same  up  to  customer's  account  with- 
out special  order.  In  a  few  states,  however, 
including  Minnesota,  the  rule  of  the  Nego- 
tiable Instruments  Act  has  been  changed  and 


124 


NOTES  PAYABLE  AT  BAXK 


1023 


bank  should  not  pay  without  special  order 
from  customer.     Vol.  10,  p.  854,  June,  1918. 

1015.  (Miss.)  In  states  having  the  Ne- 
gotiable Instruments  Law  (\<qth  a  few  ex- 
ceptions) a  note  payable  at  the  maker's  bank 
is  equivalent  to  an  order  on  the  bank  to  pay 
the  same  for  his  account.  In  Mississippi  the 
point  has  not  yet  been  decided,  but  the  safer 
practice  is  for  the  bank  to  refuse  to  pay  in 
tlie  absence  of  instructions.  Vol.  5,  p.  106, 
Aug.,  1912. 

Note:  The  Negotiable  Instruments  Act  was 
passed  in  Mississippi  in  191G;  see  note  under 
lieading  "Notes  payable  at  bank." 

1016.  (Mo.)  Under  Negotiable  Instru- 
ments Act,  except  where  modified  in  certain 
states,  it  is  the  duty  of  a  bank  whose  depos- 
itor has  made  his  note  payable  at  the  bank 
to  pay  the  same  at  maturity,  the  funds  being 
sufficient,  althougli  tlicre  is  no  other  express 
instruction  from  the  depositor  to  pay.  Vol. 
6,  p.  506.  Jan.,  1914. 

1017.  (Okla.)  A  holds  note  of  B  pay- 
able to  order  of  A  at  C  bank.  B  has  money 
on  deposit  at  C  bank  at  maturity  of  note.  C 
bank  is  uncertain  of  its  right  and  duty  to  pay 
when  presented  at  maturity.  Opinion:  The 
Negotiable  Instruments  Law  provides : 
"Where  the  instrument  is  made  payable  at 
a  bank  it  is  equivalent  to  an  order  to  the  bank 
to  pay  the  same  for  the  account  of  the  prin- 
cipal debtor  tliereon."  Vol.  4,  p.  219,  Oct., 
1911. 

1018.  (W.  Va.)  The  purpose  of  the  sec- 
tion of  the  Negotiable  Instruments  Law  mak- 
ing a  note  payable  at  a  bank  equivalent  to  an 
order  to  pay  for  the  account  of  the  maker,  is 
to  oblige  as  well  as  to  authorize  the  bank  to 
pay  when  in  funds,  and  it  was  enacted  to 
clear  up  a  conflict  in  decisions.  Vol.  4, 
p.  304,  Nov.,  1911. 


Maker's  readiness  to  pay  stops  interest 

1019.  (Okla.  A  made  his  note  payable 
at  a  bank  on  demand  after  date.  The  note 
was  not  presented  at  the  bank  where  the 
maker  always  had  sufficient  funds.  Opinion: 
The  maker  is  liable  in  an  action  by  the  payee, 
but  if  the  maker  pleads  and  proves  that  he 
had  sufficient  funds  in  the  bank  at  maturity 
and  pays  the  money  into  court,  he  is  lial)le 
only  for  the  principal  without  interest  after 
maturity  or  costs.    Vol.  8,  p.  518,  Dec,  1915. 

1020.  (Iowa.)  Where  maker  has  funds 
in  bank  at  maturity,  failure  of  bank  owning 
note  payable  at  bank  to  charge  to  account,  or 
of  outside  holder  to  present  for  payment,  will 
stop  tlie  running  of  interest.  Vof.  5,  p.  831, 
June,  1913. 


Payment  after  maturity 
See  1335,   133G 

1021.  (Kan.)  Where  a  customer  makes 
a  note  payable  at  a  bank,  the  Negotiable  In- 
struments Laws  provides  that  the  instrument 
is  an  order  to  the  bank  to  pay  the  same  for  the 
account  of  the  principal  debtor  thereon. 
Where  the  note  is  payable  "thirty  days  after 
date,"  tlie  bank  should  pay  at  maturit)'.  If 
j)resented  after  the  maturity  the  bank  slinuld 
first  require  express  authority  from  the 
maker.  If  the  note  is  "payable  on  demand 
after  date"  the  bank  should  pay,  provided  the 
note  was  presented  within  a  reasonable  time. 
Vol.  5,  p.  524,  Feb.,  1913. 

Note:  This  section  of  the  Negotiable  Instru- 
ments Act  making  an  instrument  payable  at  a 
bank  equivalent  to  an  order  to  pay  was  ropeale<l 
by  the  Legislature  of  Kansas,  I'h.  04,  Laws  of 
1915.  See  note  \inder  heading  "Instruments  pay- 
able at   liank." 


NOTICE  OF  DISHONOR 


Accommodation  indorser  entitled  to 
notice 

See  1173 

1022.  (D.  C.)  Three  accommodation 
notes  intended  for  discount  were  drawn  as 
follows:  No.  1,  payable  to  and  indorsed  by  ac- 
commodation party  and  discounted  for  tlie 
maker;  No.  3,  payable  to  bank,  indorsed  by 
the  accommodation  party  and  discounted  for 
the  maker;  No.  3,  made  by  accommodation 
party  and  discounted  for  the  payee.     Ojnn- 


ion  :  The  bank  is  equally  protected  by  notes  1, 
2  or  3,  except  that  in  case  of  notes  No?.  1  and 

2,  demand  and  notice  would  bo  required  to 
preserve  the  liability  of  the  indorser,  unlc^js 
the  notes  contain  a  waiver.     As  to  note  No. 

3,  no  demand  and  notice  are  necessary  to  hold 
the  accommodation  party  who  is  liable  as 
maker.     Vol.  7,  p.  218,  Oct..  1914. 

1023.  (111.)  A  corporation  oxooutcd  its 
note  payalilc  on  demand  to  B.  and  indorsed 
for  accommodation  by  C.  one  of  its  officers. 
Payment   was   demanded    ninety  days   later 


125 


1024 


1)u;e,st  of  le(j;al  oi'INions 


and  rel'iised.  C  was  not  notified  of  its  non- 
})ayment  until  several  weeks  thereal'tcr. 
Opinion:  Under  the  Ne;^otial)le  Iiistniinerits 
Act,  C,  the  indorser,  is  released  from  liability. 
Irrespective  of  the  (juestion  whether  demand 
of  payment  was  made  in  due  season,  the  fail- 
ure to  give  C  due  notice  of  dishonor  released 
C.     Vol.  8,  p.  326,  Oct.,  1915.     See  76. 

1024.  (Ind.)  A  customer  discounted 
and  forwarded  for  collection  a  note  given  T:)y 
a  corporation  and  indorsed  by  officers  of  the 
company  as  individuals.  The  corporation 
went  into  the  hands  of  a  receiver.  At  ma- 
turity the  note  was  presented  by  a  notary  at 
the  place  of  business  of  the  company,  which 
was  also  the  place  of  business  of  the  indors- 
ers,  but  being  closed  he  was  unable  to  make 
formal  demand.  The  notary  notified  the 
payee  of  the  dishonor  but  no  notice  of  pro- 
test was  sent  to  the  individual  indorsers. 
Opinion:  The  officers  of  a  corporation  who 
indorse  its  note  are  entitled  to  due  present- 
ment and  notice  of  dishonor  unless  the  facts 
constitute  an  implied  waiver  or  the  indorser 
is  the  person  to  whom  the  instrument  is  pre- 
sented for  payment.  Under  the  facts  there 
would  seem  a  fair  ground  for  holding  the  in- 
dorsers liable,  although  there  was  an 
omission  of  notice  of  dishonor.  Assuming, 
however,  the  accommodation  indorsers  were 
discharged,  neither  the  collecting  bank  nor 
notary  would  be  liable,  because  it  is  only  ob- 
ligatory upon  a  collecting  bank  to  notify  its 
immediate  principal.  Vol.  9,  p.  236,  Sept., 
1916. 

Duty  to  notify 

1025.  (Colo.)  A  bank  in  Colorado  re- 
ceived from  its  customer  a  promissory  note 
for  collection  in  Milwaukee.  The  note  was 
signed  by  A  and  indorsed  unqualifiedly  by  B, 
and  was  forwarded  to  its  Milwaukee  corres- 
pondent, who  presented  the  same  on  the  date 
of  maturity.  The  instrument  was  not  paid, 
but  the  bank  as  collecting  agent  failed  to 
notify  B  of  non-payment.  It  did,  however, 
immediately  notify  the  Colorado  bank,  which 
notified  its  customer,  who  in  turn  notified  the 
indorser.  The  indorser  has  refused  to  pay 
the  note.  Opinion:  Formal  notarial  protest 
was  not  required  to  hold  the  indorser,  the  in- 
strument not  being  a  foreign  bill  of  exchange, 
and  the  collecting  agent  in  IMihvaukee  gave 
notice  to  his  immediate  principal — that  is, 
the  Colorado  bank — apparently  in  due  sea- 
son; the  principal  immediately  notified  its 
customer,  the  prior  indorser,  and  he  in  turn 
notified  B,  his  prior   indorser,  who  is  the 


party  sought  to  be  held  liable.  Consequently 
due  notice  of  dishonor  was  given.  An  agent 
for  collection  may  either  himself  give  notice 
of  dishonor  to  all  parties  liable  or  he  may 
give  notice  to  his  principal  and  the  principal 
himself  notify  prior  indorsers.  Vol.  11,  p. 
168,  Sept.,  1918. 

1026.  (N.  Y.)  Bank  receiving  note  for 
collection  is  only  obliged  to  send  notice  of 
dishonor  or  protest  to  immediate  principal. 
Express  agreement  would  be  necessary  to 
create  duty  to  notify  all  prior  parties.  Vol. 
4,  p.  434,  Jan.,  1912. 

1027.  (N.  Dak.)  A  drawee  received 
through  the  mail  an  indorsed  inland  check, 
payment  of  which  had  been  stopped.  The 
drawee  bank,  having  returned  the  item  to  the 
presenting  bank,  asks  if  it  is  its  duty  to  notify 
all  the  indorsers  of  dishonor.  Opinion:  The 
drawee  is  not  obliged  to  notify  all  of  the  in- 
dorsers but  notice  to  the  immediate  principal 
is  sufficient.  It  is  customary,  however,  for 
the  collecting  bank  to  protest  an  inland  check 
as  a  convenient  means  of  proving  dishonor. 
Vol.  9,  p.  499,  Dec,  1916. 

Notice  upon  default  of  instalment 

1028.  (Mich.)  The  principle  is  well 
established  that  where  the  principal  of  a 
note  is  payable  in  instalments,  a  failure  to 
pay  one  of  them  when  due  makes  the  note 
dishonored  paper.  An  indorser  is  discharged 
by  failure  to  give  notice  of  dishonor  upon 
default  in  payment  of  an  instalment,  but 
according  to  some  cases,  is  liable  for  subse- 
quent instalments  of  the  non-pa}'ment  of 
which  he  is  duly  notified.  Vol  7,  p.  998, 
June,  1915. 

1029.  (Mich.)  A  gave  B  his  note  for 
$825,  payable  in  monthly  instalments  of 
$25.  A  made  sundry  payments  but  not  ac- 
cording to  the  agreed  instalments  and  finally 
owed  $135  on  the  note  on  the  day  the  whole 
debt  would  have  been  discharged  had  the 
payments  been  regular.  Xotice  of  protest 
was  duly  mailed  to  C,  the  indorser,  who 
claimed  non-liability  because  he  received  no 
notice  of  A's  failure  to  pay  each  instalment 
according  to  the  terms  of  the  instrument. 
Opinion:  Upon  the  first  default  in  payment 
of  any  instalment,  the  note  became  overdue 
and  dishonored.  C  the  indorser  was  dis- 
charged by  failure  to  give  notice  of  dishonor 
upon  the  default  in  payment  of  the  instal- 
ment. According  to  some  cases,  if  the  in- 
dorser is  notified  of  the  non-payment  of  sub- 
sequent instalments,  he  can  be  held,  but  this 


126 


NOTICE  OF  DISHONOR 


1037 


rule  would  not  apply  in  the  present  case  ex- 
cept, possibly,  as  to  the  Kist  instalment.  Vol. 
7,  p.  998,  June,  1915. 

Provisions  in  the  Negotiable  Instruments 
Law 

See  1034,  1173 

1030.  (Pa.)  The  Negotiable  Instru- 
ments Law  governing  notice  of  dishonor 
provides  that :  "The  notice  may  be  in  writ- 
ing or  merely  oral,  and  may  be  given  in  any 
terms  which  sufficiently  identify  the  instru- 
ment, and  indicate  that  it  has  been  dishon- 
ored by  non-acceptance  or  non-payment.  It 
may  in  all  cases  be  given  by  delivering  it 
personally  or  through  the  mails."  For  a 
form  of  notice  see  Vol.  2,  p.  190,  Nov.,  1909. 

Sufficiency   of   notice 

1031.  (Colo.)  A  check  of  $111  on  a 
hank  in  Ohio  was  indorsed  on  October  26th 
to  a  bank  in  Colorado  by  one  of  its  depositors 
and  forwarded  for  collection.  Notice  of  pro- 
test was  not  received  by  the  bank  until  No- 
vember 11th  and  the  amount  was  described 
as  $110.  The  bank  immediately  notified  its 
depositor  that  it  had  received  such  notice  of 
protest.  The  depositor  refused  to  reimburse 
the  bank  on  the  ground  that  the  notice  of 
protest  did  not  refer  to  the  item  indorsed 
iiy  him.  Notice  of  protest  of  a  further  check 
deposited  at  the  same  time  was  not  received 
by  the  bank  until  November  14th.  Opinion: 
The  mere  inaccuracy  in  the  statement  of  the 
amount  of  the  dishonored  check  did  not  in- 
validate the  notice  of  protest  where  the  in- 
dorser  was  not  misled  thereby.  But  assum- 
ing the  checks  were  presented  and  protested 
on  October  31st  (the  inquiry  omits  the  date 
of  forwarding)  the  notice  of  dishonor  should 
have  been  mailed  not  later  than  November 
2d,  and  the  fact  that  the  notice  was  not  re- 
ceived in  one  case  until  November  llth  and 
in  the  other  until  November  14th  would  in- 
dicate that  the  notice  Avas  not  mailed  in  due 


season  and  the  indorser  would  be  discharged. 
The  Colorado  lank,  however,  can  recover 
from  the  collecting  bank  if  the  latter  was 
responsible  for  the  delay  which  responsibility 
would  extend  to  the  negligence  of  the  notary 
employed  by  it.     Xo].  9,  p,  oSO,  Jan.,  1917.' 

Surety-maker  of  note  not  entitled  to 
notice 

>.<-e   !U)7 

1032.  (Neb.)  B  and  C  made  a  note 
payal)U'  to  A.  At  maturity  B  refused  to  pay. 
Six  months  later  A  demanded  payment  from 
C,  who  refused  on  the  ground  that  he  received 
no  notice  of  dishonor.  Oinnion:  No  notice 
was  required  to  bind  C,  who  is  one  of  the 
makers,  even  though  he  is  suretv  for  another 
maker.     A'ol.  4,  p.  94,  Aug.,  1911. 

1033.  (S.  C.)  Notice  of  dishonor  is  not 
required  to  be  given  the  maker  of  a  note,  and 
a  joint  maker,  though  a  surety,  is  not  entitled 
to  such  notice.     Vol.  6,  p.  687,  April,  1914. 

Waiver  of  notice  of  dishonor 
See  1170  et  scq 

1034.  (Mass.)  Under  the  Negotiable 
Instruments  Law  a  waiver  of  demand  and 
notice  if  embodied  in  the  instrument  binds 
all  parties,  but  where  it  is  written  above  the 
signature  of  an  indorser  it  binds  him  only. 
The  law  does  not  recpiire  the  waiver  to  be 
handwritten.     Vol.  9,  p.  415,  Nov.,  1916. 

1035.  (S.  C.)  In  the  body  of  a  note  was 
inserted  "notice  of  ])rotest  is  hereby  waive<i 
by  all  parties  liable  herein.''  Ofiinion:  This 
is  binding  on  all  parties  as  a  waiver  of  notice. 
but  miglit  not  be  construed  as  a  waiver  of 
l)reseiitmcnt.     Vol.  6.  p.  687,  April,  1914. 

1036.  (S.  C.)  W  here  a  note  payable  to 
a  l)ank  was  signed  on  its  face  by  John  Doe 
and  on  its  back  l»y  IJichard  IJoo  the  latter  is 
liable  as  an  indorser  and  is  entitled  to  notice 
of  dishonor,  uidess  the  instrument  contains 
a  waiver.     V»L  «i.  p.  687,  April,  1914. 


PASS-BOOKS 


Assignment  of  pass-book 

1037.  (N.  H.)  r.ank  A  loaned  an  iinli- 
vidual  $1,000  upon  the  collateral  security  of 
a  written  order  and  a  pass-book  connected 
with  a  savings  account  in  Bank  B.  Bank  li 
received  and  accepted  notice  of  the  assign- 
ment and  later  failed.  The  depositor  was 
also  a  stockholder  in  Bank  B,  lial)le  to  assess- 
ment.    The  receiver  of  Bank  B  refused  to 


obey  tiie  written  order  given  by  its  depositor 
and  jiroposed  to  hold  the  account  to  soiMirc 
the  depositor's  lialiility  as  stockholder.  OjAn- 
ion:  Bank  A  is  entitled  to  the  deposit  and 
sueli  right  is  .^^uperior  to  any  claim  of  lien 
by  the  receiver  for  B.  In  this  case  the  as- 
signment would  have  been  valid,  even  without 
the  notice  to  or  acceptance  bv  Bank  B.  Vol. 
8,  p.  510,  Dec.,  1915. 


127 


1038 


DIGEST  OF  LEGAL  OPINIONS 


1038.  (N.  C.)  A  savings  bank  or  sav- 
ings (l('i)artnient  pass-hook  contains  a  rule 
reiiuiring  its  present nient  wlien  money  is 
withdrawn  in  order  that  j)aynu'nt  may  he 
duly  ent^^red  therein.  A  check  was  cashed 
without  sucii  presentment  and  no  entry  ol"  the 
witlidrawal  was  made  in  the  pass-book.  An 
innocent  assignee  or  pledgee  of  the  book  ad- 
vanced value  thereon  upon  faith  of  the  entries 
shown.  Opinion:  A  savings  pass-book 
is  not  negotiable  and  the  assignee  cannot  hold 
the  bank  liable  where  the  withdrawals  have 
not  been  entered  as  provided  by  the  rules 
printed  in  the  book.  The  savings  bank  is  not 
estopped  to  show  the  tnie  state  of  the  account. 
Vol.  7,  p.  306,  Nov.,  1914. 

1039.  (S.  Dak.)  A  depositor  of  a  sav- 
ings bank  withdrew  from  his  account  of  $500 
the  sum  of  $100,  but,  contrary  to  the  rules 
printed  in  his  pass-book,  the  withdrawal  was 
not  entered  therein.  He  then  assigned  the 
book,  showing  a  balance  of  $500  to  Bank  A, 
which  cashed  his  check  for  $500.  The  sav- 
ings hank  admitted  liability  only  to  the 
extent  of  $400.  Opinion:  Bank  A  is  the  loser 
of  $100  unless  it  can  recover  that  amount 
from  the  depositor.  The  savings  bank  is  not 
liable,  because  the  pass-book  is  not  a  nego- 
tiable instrument  and  Bank  A  took  no  greater 
rights  than  the  depositor.  Vol.  3,  p.  9, 
July,  1910. 

1040.  (S.  Dak.)  A  savings  t)ank  or 
savings  department  pass-book  is  not  a  nego- 
tiable instrument,  and  an  assignee  of  the 
book  and  account  from  the  depositor  takes 
no  greater  rights  than  the  latter  against  the 
bank.     Vol.  3,  p.  9,  July,  1910. 

Duty  of  depositor  to  examine  pass-book 

1041.  (W.  Va.)  An  item  of  $50  cred- 
ited in  a  pass-book  in  December,  1911,  was 
not  entered  on  the  bank's  ledger  to  the  credit 
of  the  depositor  and  was  omitted  in  the  bal- 
ancing of  the  account  in  January,  1912,  and 
in  subsequent  balancing.  No  claim  was  made 
that  the  bank  had  made  an  error  until  more 
than  six  years  later,  and  then  by  the  admin- 
istrator of  the  depositor.  In  the  meantime, 
the  deposit  tickets  of  December,  1911,  were 
destroyed  and  the  administrator  could  not 
produce  the  checks  which  entered  into  the 
balance  of  January,  1912.  Is  tlie  bank  liable 
for  the  amount?  Opinion:  In  this  case  it 
would  undoubtedly  he  held  that  the  failure 
on  the  part  of  the  depositor  to  examine  his 
pass-hook  and  returned  vouchers  without  un- 
reasonable delay,  and  to  report  errors  to  the 
bank  will  free  the  bank  from  liability.     It  is 


the  duty  of  a  depositor  to  examine  his  pa.s8- 
book  and  report  errors  within  a  reasonable 
time  after  balancing  and  his  failure  so  to  do 
will,  according  to  some  cases,  estop  him  from 
thereafter  questioning  its  correctness,  if  the 
bank  would  be  thereby  prejudiced,  while  other 
cases  hold  he  is  not  thereby  estopped,  but  that 
the  burden  of  showing  error  is  placed  on  the 
depositor.     Vol.  11,  p.  98,  Aug.,  1918. 

Nature  of  pass-book 

Soe   141,  4G6,  814,   1038 

1042.  (Colo.)  Bank  A  cashed  several 
checks  for  a  party  drawn  on  a  bank  at  Sul- 
phur Springs,  Colorado,  upon  the  strength 
of  a  pass-book  given  him  by  that  institution, 
sliowing  a  credit  of  $300.  The  Sulphur 
Springs  bank  refused  payment  of  the  checks, 
stating  that  credit  was  given  the  drawer  by 
mistake  and  the  entry  in  the  pass-book  was 
invalid.  Opinion:  The  pass-book  was  not  a 
letter  of  credit,  but  merely  prima  jade  evi- 
dence of  a  deposit  and  the  bank  may  show 
that  credit  was  given  by  mistake  or  for  an 
invalid  item.  A  check  not  being  an  assign- 
ment under  the  Negotiable  Instruments  Law 
Bank  A  has  no  right  of  action  thereon  against 
the  drawee.     Vol.  4,  p.  492,  Feb.,  1912. 

Presentation  of  savings  pass-book 

See  529  et  seq.,  1012 

1043.  (Pa.)  A  depositor  having  a  sav- 
ings account  issued  his  check  to  the  order  of 
B  in  negotiable  form.  The  check  was  de- 
livered to  B  without  the  pass-book,  which 
provided  that  the  bank  will  not  honor  any 
checks  on  the  account  unless  accompanied  by 
the  pass-book.  B  indorsed  to  the  order  of  C, 
who  had  the  check  certified  by  the  bank. 
After  the  bank  charged  the  amount  to  the 
drawer's  account,  it  learned  that  B  obtained 
the  check  through  fraud.  Opinion:  Pa}Tnent 
of  such  a  check  without  production  of  the 
pass-book  would  probably  be  valid,  the  condi- 
tion of  production  being  waived  by  both 
drawer  and  drawee;  and,  payment  being 
valid,  certification  of  the  check  in  the  hands 
of  a  bona  fide  holder  would  be  equally  charge- 
able to  the  depositor.  Vol.  5,  p.  525,  Feb., 
1913. 

Rules  in  savings  pass-book 
See   504,   530,   531,   532,    1038 

1044.  (Pa.)  A  check  drawn  on  the  D 
national  bank  was  cashed  by  a  bank  and  pre- 
sented to  the  drawee,  which  refused  pavTiient, 
stating  that  the  drawer  had  a  savings  account 
which  was  good  for  the  amount  but  the  rules 


128 


PAYMENT 


1051 


required  that  a  check  on  the  savings  depart- 
ment must  be  accompanied  by  the  customer's 
bank-book.  The  holder  questions  the  right 
of  the  drawee  to  refuse  payment  under  such 
rules.  Opinion:  The  rules  constitute  a  con- 
tract between  bank  and  depositor  under 
which  the  bank  would  have  a  right  to  refuse 
to  pay  a  check  unless  accompanied  by  the 
book.  The  remedy  of  the  holder  of  the 
check  is  against  the  drawer  and  prior  parties, 
unless  the  book  can  be  procured  from  the  de- 
positor to  accompany  the  check.  Vol.  2,  p. 
412,  April,  1910. 

1045.  (W.  Va.)  The  by-laws  contained 
in  a  savings  bank  pass-book  provide :  ''If  any 
person  shall  present  a  book  and  falsely  allege 
himself  or  herself  to  be  the  depositor  named 
therein,  and  thereby  obtain  the  amount  de- 


posited, or  any  part  thereof,  this  institution 
will  not  be  liable  to  make  good  any  loss  tlie 
actual  depositor  may  sustain  thereby,  unless 
previous  notice  of  his  or  her  book  haring 
been  lost  or  taken  shall  have  been  given  at  the 
office  of  the  bank."  A  book  of  a  depositor 
was  stolen,  presented  to  the  bank  and  pay- 
ment was  made  on  a  forged  signature.  The 
liank  received  no  notice  of  the  loss  of  the  book 
until  the  day  after  tiie  forgery  was  perpe- 
trated. Under  the  above  rule  what  are  the 
bank's  rights?  Opinion:  A  rule  printed  in 
the  pass-book  of  a  depositor  that  the  bank  will 
not  be  liable  fur  payment  to  a  person  pre- 
senting the  book  who  falsely  alleges  himself 
to  be  the  depositor,  will  not  relieve  the  bank 
making  payment  to  such  person  upon  forged 
order  unless  it  uses  reasonable  care.  Vol.  10, 
p.  46,  July,  1917. 


PAYMENT 


Payment  after  notice  of  assignment 

1046.  (Ariz.)  The  purchaser  of  a  bill 
of  goods  from  a  firm  in  New  York  City 
brought  the  invoice  of  the  goods  to  his  bank, 
which  at  his  request  made  and  sent  a  draft 
payable  to  the  firm  in  payment  for  the  goods. 
The  invoice  contained  the  following  notation 
printed  in  red  ink,  which  Avas  overlooked  by 
the  bank  and  the  debtor :  "This  bill  is  as- 
signed and  payable  to  A,  B,  &  Co.,  Bankers." 
Opinion:  In  the  event  the  firm  did  not  refund 
the  amount  of  the  draft  which  was  paid  by 
mistake,  the  debtor  who  had  notice  of  the  as- 
signment must  pay  again  to  the  assignee. 
The  notice  of  the  assignment  printed  in  red 
ink  was  of  such  prominence  as  to  be  regarded 
as  suificient.  The  bank  would  not  be  lialile 
for  negligence  in  overlooking  the  notice  of 
assignment,  because  debtor  also  overlooked 
same  and  the  mistake  was  mutual.  Vol.  7, 
p.  100,  Aug.,  1914. 

1047.  (Tenn.)  A  dealer  who  sold  a  bill 
of  timber  to  a  ship  building  company  made 
an  account  against  the  company  and  trans- 
ferred it  to  a  bank,  at  the  same  time  notifying 
tiie  company  of  the  assignment.  The  com- 
pany nevertheless  sent  its  check  to  the  dealer. 
Opinion:  After  the  notice  of  assignment  to 
the  debtor,  ])uynient  to  the  assignor  is  at  its 
risk  and  renders  the  company  liable  in  case 
of  loss.     Vol.  5,  p.  173,  Sept.,  1012. 

Application  of  payment 

1048.  (Mont.)  A  gave  his  note  to  a 
baid-c  and  B  signed  Avith  him.     After  matur- 


ity A  tendered  the  money  to  the  bank  with  the 
request  that  it  be  applied  on  such  note.  The 
bank  applied  the  money  on  other  notes  of  A. 
Opinion:  B  as  surety  has  a  perfect  defense  to 
a  suit  on  the  note  in  the  plea  of  payment. 
A  debtor  voluntarily  paying  money  to  liis 
creditor  has  the  primary  and  paramount 
right  to  direct  the  application  of  his  money 
to  such  demands  as  he  chooses.  Vol.  7.  j).  38, 
July,  1914. 

1049.  (Wyo.)  A  bank  held  two  past 
due  notes,  one  insufficiently  secured  by  real 
estate,  and  the  other  over-secured  by  chattels. 
In  satisfaction  of  the  chattel  mortgage  note, 
the  debtor  tendered  his  check  marked  "for 
chattel  mortgage."  The  bank  refused  to 
apply  payment  as  specified  and  in.sistod  upon 
applying  payment  upon  the  real  estate  note. 
The  debtor  ae<|uieseed  in  the  action  by  the 
bank.  Opinion:  T\\o  deljtor  had  tiie  ]>riniary 
rigid  to  have  the  money  applied  in  payment 
of  the  chattel  nmrtgage  note,  but  where  the 
bank  ap|)lied  the  {)ayment  upon  another  debt, 
asc(|uiescen('e  bv  the  debtor  ratified  such  ap- 
plication.    Vol".  7,  p.  37.  July.  1:M  I. 

Conditional  payment  by  check 

1050.  (N.  Y.)  .\  check  taken  a»  abso- 
lute payment  of  a  note  will  operate  to  extin- 
guish the  note,  but,  in  the  absence  of  an 
agreement,  the  giving  and  receipt  of  a  check 
is  usually  considered  a  conditional  payment 
onlv  and  not  ab.'iolute  until  the  check  itself  is 
paid.     Vol.  '\  p.  829,  June,  1913. 

1051.  (Wis.)  A  check  was  received  by 
a  bank  to  take  up  a  note  held  by  it  due  on 


129 


1052 


DKii'is^r  oi'  lI':(;ai.  oimxions 


the  fitli.  The  noto  was  rctaiiul  until  jmy- 
iiiont  of  the  check  on  the  7th.  Oijinioii:  The 
checjk  was  received  as  conditional  payment, 
and  the  stainpin*^  of  the  note  "paid  on  the 
7th"  is  correct  as  indicating  the  date  of  ac- 
tual i)avnicnt.  Vol.  0,  p.  J)4,  Aug.,  1913. 
See  11(5'). 

Payment  by  mistake 

Sec    4-24,    4S4,    4S.j,    (iUi,    (V.U 

1052.  (111.)  A  customer  handed  in  to 
liis  hank  several  checks  aniountin_ti;  to  several 
hundred  dollars,  and  from  this  amount  a 
note  and  interest  was  deducted  and  a  halance 
struck  in  favor  of  the  customer,  which  was 
paid  over.  It  was  afterwards  discovered  that 
the  balance  was  incorrectly  figured  at  an  ex- 
cess of  $30.  Opinion:  The  bank  can  recover 
the  money  as  being  paid  under  a  mistake  of 
fact.  The  fact  that  the  error  was  made  in 
figuring  the  balance  makes  the  case  stronger 
for  the  bank  than  if  the  balance  was  correctly 
struck  and  the  mistake  occurred  in  paying 
over  the  cash,  for  the  teller's  testimony  of 
over-payment  would  be  supported  bv  the  orig- 
inal figures.     Vol.  4,  p.  493,  Feb.,"l912. 

1053.  (Mont.)  A  bank  in  Montana  re- 
ceived from  a  Kentucky  bank  a  sight  draft 
for  $72. G7  with  a  bill  of  lading  attached 
covering  a  balance  claimed  due  on  a  shipment 
of  liquor  from  a  Kentucky  distillery  to  a  local 
liquor  dealer.  The  local  dealer  paid  the 
Montana  bank  the  amount,  surrendered  the 
bill  of  lading  and  obtained  his  goods.  The 
Montana  bank  by  mistake  sent  its  draft  pay- 
able to  the  distillery  instead  of  to  the  bank. 
The  distillery  under  the  misapprehension  that 
the  draft  came  from  the  local  dealer,  instead 
of  turning  it  over  to  its  bank  or  returning  it 
to  the  Montana  bank,  indorsed  it  in  blank  and 
returned  it  to  the  local  dealer.  The  dealer 
cashed  it  at  the  Montana  bank  and  held  the 
money,  claiming  that  "the  distillery  was  in- 
debted to  him  for  $68.  The  Montana  bank 
wishes  to  be  advised.  Opinion:  The  local 
dealer  is  not  a  holder  in  due  course  and  the 
Montana  bank  has  a  right  of  recovery  of  the 
money  paid  to  him  under  the  rule  that  money 
paid  under  mistake  of  fact  is  recoverable. 
Vol.  10,  p.  o9G,  Feb.,  1918. 

1054.  (Mont.)  A  bank  in  the  ordinary 
course  of  business  pays  to  a  bona  fide  holder 
a  check  drawn  on  it,  under  the  mistaken  be- 
lief that  the  drawer  had  funds  when  he  had 
not.  Opinion :  Payment  cannot  be  recovered, 
and  the  fact  that  the  holder  would  be  in  no 
worse  position  if  com])elled  to  refund  than  if 
payment  had  not  been  made  does  not  author- 
ize a  recovery.     Vol.  10,  p.  377,  Nov.,  1917. 


1055.  (Neb.)  A  will  bequeathed  a  leg- 
acy (o  John  iirown  of  Howard,  111,,  the  real 
legatee  intended  being  John  Brown  of  Hall, 
III.,  who  had  never  lived  at  Howard.  The 
executrix  notified  John  I>rown  of  Howard, 
sending  him  a  receifjt  and  instructing  a  bank 
to  forward  him  the  amount  upon  receiving 
the  receipt.  The  instruction  was  cariied  out 
by  the  bank.  Opinion:  There  is  no  liability 
on  the  part  of  the  bank  but  the  executrix  is 
liable  to  the  real  legatee,  unless  the  misde- 
scription of  his  address  in  the  will  should 
be  held  sufficient  to  estop  him  from  question- 
ing the  validity  of  the  payment.  Vol,  10,  p. 
715,  April,  1918. 

1055.  (Pa.)  A  deposit  of  $105  made  by 
one  depositor  was  erroneously  credited  to  an- 
other depositor,  who  checked  out  the  amount. 
Opinion:  The  bank  has  a  right  of  action 
against  the  custom.er  to  recover  the  amount  of 
the  overdraft  with  interest  from  the  time 
overdrawn.  Vol.  7,  p.  492,  Jan.,  1915.  See 
484,  485. 

1057.  (Tex.)  A  bank  collected  A's  bill 
of  lading  draft  from  B  and  remitted  the  pro- 
ceed by  mistake  to  C,  who  was  a  creditor  of 
B  on  open  account;  C  took  the  money  and 
applied  it  on  B's  debt  and  thereafter  settled 
with  him  and  relinquished  security  for  in- 
debtedness. The  bank  paid  A  and  having 
paid  twdce  made  demand  on  C.  C  refused  to 
refund,  claiming  that  it  is  B's  duty  to  return 
the  money  to  the  collecting  bank.  Opinion : 
It  is  a  general  rule  that  money  paid  under  a 
mistake  of  fact  may  be  recovered  back,  and 
unless  C  received  this  money  in  the  honest 
belief  that  it  was  intended  as  a  pav'ment  on 
account  of  B's  indebtedness  and  on  faith 
thereof  surrendered  the  security  to  B,  C 
would  be  liable.     Vol.  8,  p.  34,  July,  1915. 

Payment  of  overdrawn  letter  of  credit 

1058.  (Kan.)  A  bank  issued  a  letter  of 
credit  for  $100,  promising  to  honor  drafts  to 
that  amount.  The  letter  required  that  the 
amount  of  each  payment  be  indorsed  on  the 
letter  and  negotiation  of  the  draft  to  consti- 
tute a  guaranty  that  the  requisite  indorse- 
ment Avas  made  and  that  all  drafts  "be  drawn 
against  our  letter  of  credit  No.  101."  Five 
drafts  of  $25  each  were  drawn  and  paid, 
creating  an  overdraft  of  $25.  The  first  draft 
stated  it  was  drawn  against  the  letter;  the 
next  three  did  not  so  state  and  the  letter  was 
attached  to  the  last  draft  drawn.  Opinion: 
The  bank  has  recourse  upon  its  customer  for 
the  overdraft  but  will  have  no  recourse 
against  anv  of  the  cashing  banks  unless  it 


130 


PLEDGE  AND  COLLATERAL 


10G3 


can  prove  the  drafts  were  negotiated  against 
the  letter  and  the  requirements  not  complied 
with.  The  bank  should  have  refused  pay- 
ment of  drafts  not  indorsed  as  drawn  against 
the  letter,  for  otherwise  such  drafts  could  be 
negotiated  witliout  showing  the  letter.  Vol. 
6,  p.  573,  Feb.,  1914. 

1059.  (Okla.)  A  bank  issued  a  general 
letter  of  credit  authorizing  drafts  to  a  certain 
amount  to  be  indorsed  upon  the  letter  of 
credit.  The  question  is  raised  as  to  whom 
would  be  the  loser,  if  another  bank  m.iking 
a  payment  on  the  letter  of  credit  neglected  to 
make  a  notation  of  this  payment  and  through 
this  neglect  gave  the  holder  an  opportunity 
to  draw  more  than  the  face  of  the  letter  of 
credit.  Opinion:  The  bank  issuing  the  letter 
of  credit  is  liable  to  the  innocent  purchaser 
of  a  draft  drawn  against  the  latter  and  within 
its  amount,  notwithstanding  the  holder  of  the 
letter  has  previously  exhausted  the  credit  by 
drafts  not  so  indorsed.  It  would  be  liable  for 
an  amount  within  the  unindorsed  total  of 
the  letter  of  credit,  although  it  had  paid  the 
full  amount  of  the  letter  upon  drafts  which 
had  not  been  indorsed  thereon.  In  order  to 
safeguard  the  issuing  bank  from  being  misled 
into  paying  an  ordinary  draft  i)y  the  drawer 
of  the  letter  but  not  indorsed  there,  the  only 
protection  would  be  to  require  that  drafts 
drawn  against  the  letter  should  specify  upon 
their  face  that  they  were  so  drawn  and  that 
their  amount  had  been  indorsed  upon  the 
letter;  the  bank  refusing  to  pay  such  drafts 
as  did  not  contain  this  statement.  The 
draft  might  contain  a  clause :  "Drawn  against 

your  letter  of  credit   No and   the 

amount  of  this  draft  has  been  indorsed  there- 


on." If  the  draft  itself  contained  such  state- 
ment, this  would  be  an  express  warranty  by 
the  purchaser  to  the  drawee  of  a  material 
fact  which,  if  false  and  the  drawee  relied 
thereon  to  his  injury,  would  entitle  him  to 
recourse  upon  such  purchaser.  Vol.  11,  p. 
494,  March,  1010. 

Partial  payment 
S,-..  771.  <)Glt,   11^8,  1211 

1060.  (Mo.)  A  credit  of  $1,000  on  a 
note  as  part  payment  was  in  the  maker's 
handwriting.  The  executor  of  the  payee 
doubts  that  such  payment  was  ever  made, 
and  inquires  iiow  to  proceed  to  overcome  the 
indorsement.  Opinion :  The  burden  of  proof 
is  on  the  maker  to  establish  the  fact  of  part 
payment,  unless  the  indorsement  is  in  tlie 
liandwriting  of  the  creditor.  Vol.  5,  p.  517, 
Feb.,  1!)i:]. 

Effect  of  words  "with  exchange" 

1061.  (Conn.)  A  draft  payable  in  Phil- 
adelphia "with  New  York  Exchange"  was 
presented  for  payment.  The  acceptor  ten- 
dered the  face  amount  in  New  York  exchange, 
which  was  refused  by  the  collecting  bank. 
The  collecting  bank  considered  "with  New 
York  Exchange"  meant  "plus  New  York  Ex- 
change" and  required  the  payment  of  the 
cost  of  exchange  on  New  York.  Opinion: 
The  draft  called  for  payment  of  tiie  face 
amount  plus  the  cost  of  exchange  on  New 
York,  and  the  collecting  bank  would  be  jus- 
tified in  protesting  and  returning  the  draft. 
Vol.  (),  p.  fi;n,  :March,  19 H. 

See  3C)0,  ofil,  302,  1004. 


PLEDGE  AND  COLLATERAL 


Accounts  receivable  as  collateral  security 

1062.  (Pa.)  To  constitute  a  valid 
pledge  of  an  account  receivable  there  must 
be  an  assignment  in  writing,  mere  delivery  of 
a  copy  of  the  account  being  insufficient.  In 
case  of  such  assignment  of  accounts,  tbe  bank 
is  safe  if  the  debtor  is  notified  before  ]iay- 
nent  to  the  assignor;  or  where  the  borrower 
acts  as  the  lender's  agent  to  colloct  tiie  ac- 
counts, a  bond  or  security  for  tbe  fidelity  of 
the  agent  should  be  required.  Where  the  as- 
signment is  for  the  ])urpose  of  securing  credit 
and  not  for  a  prior  debt,  the  bank  in  the  event 
of  the  borrower's  bankruptcy,  would  have  a 
prior  claim  upon  such  accounts  for  the 
amount  of  its  advances ;  but  wliere  the  as- 


signmtMit  is  made  within  four  months  of  the 
borrower's  l)ankruptcy  for  the  purpose  of  ise- 
(iiring  an  existing  debt,  such  assignment 
would  pnibablv  be  void  as  a  preference.  Vol. 
8,  p.  (507.  Jan.,  101  fi. 

Application   of   surplus   security   pledged 
for  specific  debt 

1063.  (Ala.)  It  is  a  well  established 
rule  at  cDniinon  law  that  in  the  absence  of  an 
agreement  to  the  contrary,  securities  pledged 
to  a  bank  to  secure  a  specified  demand  cannot 
be  held  for  other  demands  though  against  the 
same  debtor.  It  is  owinir  to  such  rule  that 
clauses  are  inserted  in  collateral  notes  makinj? 
the  provision  that  such  collateral  is  not  only 


131 


1064 


DIGEST  OF  LEGAL  OPINIONS 


pledf^c'd  for  a  particular  debt  but  for  any 
otbcr  liability  of  tbe  pledgor.  Vol,  3,  p.  10, 
July,  1910. 

1064.  (Pa.)  Tbe  following  clause  in- 
serted in  a  note  is  legal  and  can  be  enforced : 
*'aud  it  is.  bcreby  agreofl  tbat  sucb  surplus,  or 
any  excess  of  collateral  upon  tins  nolo,  sliall 
be   applicable   to    any    other    note    or    claim 

against beld  by  said  bank." 

Tbis  form  would  be  improved  by  adding  a 
provision  that  the  collateral  might  be  held 
and  applied  upon  any  other  note  or  claim 
against  the  individual  maker  or  against  any 
firm  of  which  he  is  a  member.  Vol.  5,  p. 
169,  Sept.,  1912. 

1065.  (Pa.)  A  bank  held  a  firm  note 
which  was  secured  by  collateral  and  also  held 
a  past  due  note  of  a  third  person  which  bore 
the  indorsement  of  one  of  the  firm  members. 
The  firm  became  bankrupt  and  the  bank,  after 
selling  the  collateral  in  satisfaction  of  the 
firm  debt,  attempted  to  apply  the  surplus  on 
the  indorsed  note.  Opinion:  The  bank  can- 
not appropriate  the  surplus  of  the  collateral 
upon  the  independent  debt  of  the  individual 
member  of  the  firm,  in  the  absence  of  an 
agreement.     Vol.  1,  p.  202,  Dec,  1908. 

1066.  (Tenn.)  Bank  A  borrowed  $5,000 
from  Bank  B,  executing  its  note  therefor,  and 
pledging  $10,000  as  collateral  in  good  receiv- 
ables. The  note  did  not  provide  that  the  col- 
lateral was  to  secure  "this  or  any  other  in- 
debtedness that  may  be  incurred."  Bank  A 
overdrew  its  account  by  $5,000  and  became 
bankrupt.  Bank  B  desires  to  apply  all  the 
proceeds  of  the  $10,000  collateral  in  payment 
of  the  overdraft  as  well  as  the  note.  Opin- 
ion ;  The  collateral  being  pledged  for  a  speci- 
fic debt,  Bank  B  cannot  in  the  absence  of  an 
agreement  apply  the  surplus  to  another  in- 
debtedness. Bank  B  cannot  claim  the  sur- 
plus under  the  doctrine  of  banker's  lien,  be- 
cause the  collateral  was  not  received  in  the 
ordinary  course  of  business  but  for  a  specific 
purpose.     Vol.  8,  p.  252,  Sept.,  1915. 

Bond  for  title  given  as  security 

1067.  (Ga.)  A  purchased  a  farm  from 
B,  giving  him  cash  and  notes  therefor,  and  re- 
ceiving from  B  a  bond  for  title.  A  transferred 
the  bond  to  a  bank  as  security  for  a  loan. 
After  the  bond  and  transfer  had  been  duly 
recorded,  the  bank  temporarily  surrendered 
the  bond  to  A  but  A  wrongfully  disposed  of 
it.  B  was  notified  of  the  transfer  and  the 
recording  clerk  was  also  notified  not  to  can- 
cel the  entry.     Opinion:  The  bank  has  not 


lost  its  security  and  is  protected  in  such  bond 
as  against  a  subsequent  innocent  purchaser  or 
assignee  of  the  bond.  Vol.  5,  p.  103,  Aug., 
1912. 

Corporate   stock  as  collateral 
Sec  403 

1068.  (N.  Y.)  A  bank  holds  fifty  shares 
of  common  stock  of  an  industrial  corporation 
as  collateral.  Some  time  later,  without  knowl- 
edge on  the  part  of  the  bank,  the  corporation 
issues  preferred  stock  to  the  original  holder, 
which  depreciates  the  value  of  the  collateral. 
The  bank  seeks  to  protect  its  rights  as 
pledgee.  Opinion:  Where  common  stock  of 
an  industrial  corporation  is  pledged  with  a 
bank  as  collateral,  the  bank  to  protect  its  col- 
lateral and  right  to  dividends  should  either 
have  the  stock  transferred  or  notify  the  cor- 
poration of  the  pledge;  for  otherwise,  if  the 
corporation  without  notice  of  the  pledge, 
issues  preferred  stock  to  the  original  holder 
which  depreciates  the  value  of  the  collateral 
and  the  latter  negotiates  the  stock,  the  trans- 
feree or  pledgee  thereof  w^ould  have  a  superior 
right  thereto  than  the  original  pledgee.  Vol. 
11,  p.  606,  May,  1919. 

Enforcement  of  collateral  notes 

1069.  (Iowa.)  Bank  loaning  $250,  and 
taking  as  collateral  an  unmatured  negotiable 
note  of  third  person  for  $500  is  a  holder  for 
value  to  the  extent  of  the  amount  advanced 
with  interest  and  can  enforce  the  collateral 
note  for  that  amount,  free  from  defenses 
available  to  the  maker  against  the  payee. 
If  the  collateral  note  is  not  subject  to  defense 
the  full  amount  is  recoverable,  the  bank  being 
accountable  for  the  surplus  to  the  pledgor. 
Vol.  9,  p.  416,  Nov.,  1916. 

1070.  (La.)  X  issued  his  negotiable 
note  of  $200  payable  to  A,  which  was  in- 
dorsed to  B  as  collateral.  X  paid  A  $100  on 
the  note,  taking  A's  receipt,  but  A  failed  to 
advise  B  to  make  the  proper  credit  on  the 
note.  A  failed  and  B  seeks  to  collect  the  full 
amount  from  X.  Opinion :  Payment  by  X  to 
A  was  inefl'ective  against  B,  who  can  recover 
the  full  amount  of  the  note  or  so  much  there- 
of as  will  satisfy  his  lien.  Vol.  8,  p.  147, 
Aug.,  1915. 

1071.  (Minn.)  A  wholesale  house  de- 
livered machinery  to  a  retail  firm,  title  to 
which  was  to  remain  in  the  former  until  paid 
for  by  virtue  of  a  contract  which  was  put  on 
record.  The  firm  received  several  notes  from 
various  purchasers  of  the  machinery,  which 


132 


PLEDGE  AND  COLLATERAL 


1078 


notes  it  pledged  as  collateral  security  for  a 
loan  from  the  firm's  bank.  The  notes  con- 
tained statements  to  the  effect  that  they  were 
in  payment  for  a  plow  or  other  specified  ar- 
ticles. The  borrowing  firm  became  insolvent. 
The  bank  seeks  to  enforce  the  notes  and  the 
wholesale  house,  as  owner  of  the  machinery, 
makes  a  demand  on  the  bank  for  a  portion 
of  the  notes.  Opinion:  The  recital  in  the 
notes  that  they  were  given  in  payment  for 
certain  articles  of  machinery  does  not  affect 
their  negotiability.  The  notes  are  enforce- 
able by  the  bank  free  from  any  equities  and 
the  bank  is  entitled  to  the  proceeds  as  against 
the  claim  of  the  owner  of  the  machinery. 
The  fact  that  the  wholesale  house  held  the 
machinery  under  contract,  which  was  re- 
corded, whereby  title  thereto  should  remain 
in  the  house  until  the  machinery  was  paid 
for  would  not  affect  the  rights  of  the  bank  as 
holder  in  due  course  of  the  collateral  notes. 
Vol.  9,  p.  583,  Jan.,  1917. 

Liberty  Bond  as  collateral  security 

1072.  (S.  Dak.)  A  bank  loaned  its  de- 
positor $100,  taking  his  note  therefor,  pay- 
able October  23,  1918,  and  holding  his  $100 
Liberty  Bond  which  he  purchased  with  the 
money  borrowed  as  security  for  the  note.  In 
view  of  the  fact  that  his  bond  is  a  little  below 
par,  the  bank  seeks  to  hold  $10  of  his  deposit 
balance  as  additional  security,  while  the  de- 
positor seeks  to  withdraw  the  entire  bahmce. 
Opinion:  A  bank  which  holds  the  unmatured 
note  of  depositor  secured  by  a  Liberty  Bond, 
purchased  with  proceeds  of  note,  cannot  re- 
tain a  portion  of  depositor's  balance,  before 
maturity  of  note,  as  additional  security  for 
its  payment,  in  the  absence  of  express  con- 
tract.    Vol.  10,  p.  720,  April,  1918. 

Life  insurance  policy  assigned  as  collat- 
eral security 

1073.  (Mich.)  The  insured  and  the  ben- 
eficiary assigned  a  life  insurance  policy  to  a 
bank  as  collateral.  The  policy  contained  a 
provision  that  all  parties  must  join  in  any 
settlement  of  the  policy.  Opinion:  Tiie  bank 
holds  the  policy  subject  to  the  right  of  the 
insurance  company  to  require  all  parties  to 
join  in  the  settlement  of  the  policy.  Where 
there  exists  a  disability  on  tlie  part  of  the 
beneficiary,  the  rule  varies  as  to  the  right  of 
the  insured  or  the  beneficiary  to  make  a  valid 
assignment  in  such  a  case.  Vol.  5,  p.  592, 
March,  1913. 


Power  of  attorney  to  sell  collateral 

1074.  (Pa.)  A  promissory  note  was 
given  with  collateral  security  coupled  with  a 
power  of  attorney  to  the  holder  to  sell  the  col- 
lateral. Before  the  sale  the  maker  died. 
Opinion:  The  power  of  sale,  being  an  author- 
ity coupled  with  an  interest,  is  not  revoked 
by  the  maker's  death.  Vol.  7,  p.  167,  Sept., 
1914. 

Sale   of   collateral   on   outlawed   note 

1075.  (N.  C.)  A  bank  held  a  note  for 
$300  secured  liy  a  stoc-k  certificate  with 
power  of  sale.  The  note  became  outlawed  by 
the  Statute  of  Limitation.^.  Tlie  bank  wishes 
to  sell  the  collateral  and  apply  the  proceeds 
towards  payment  of  the  note  in  order  to  re- 
vive the  indebtedness.  Opinion:  The  bank 
has  the  right  to  sell  the  stock,  but  the  note 
once  outlawed  could  not  be  revived  by  credit- 
ing the  proceeds  on  the  note.  Vol.  6,  p.  215, 
Sept.,  1913. 

Securities  guaranteed  by  salesman 

1076.  (111.)  The  liability  of  a  bond 
salesman  as  individual  guarantor  of  securities 
sold  where  he  is  not  interested  in  the  securi- 
ties beyond  his  profits  on  the  sale  would  ex- 
tend or  be  limited  to  the  terms  of  his  agree- 
ment strictlv  construed.  A'ol.  4,  p.  307,  Nov., 
1911. 

What  constitutes  valid  pledge 
Soo  -241.   101)2 

1077.  (Tenn.)  A  form  of  pledge  of  per- 
sonal proper  as  security  for  a  loan  is  legally 
sufficient  in  Tennessee  where  it  contains  a 
provision  constituting  the  pledgor  the  agent 
of  the  pledgee  to  retain  possession  and  care 
for  the  property  as  such  agent.  To  consti- 
tute a  valid  pledge  there  must  be  delivery  of 
the  j)roperty  to  the  pledgee  and  in  some 
states  (Georgia  and  Kentucky  for  example) 
a  pledge  wherein  the  pledgor  retained  posses- 
sion as  agent  would  be  invalid  ns  against  a 
bona  fide  purchaser  of  the  projvrty  without 
notice  of  the  i)ledge.  But  in  Tenncpf^ec  it 
has  been  held  the  pledgor  can  holil  the  prop- 
erty as  agent  of  the  i)le<lgee.  For  form  of 
pledge  sec  Vol.  5.  j).  IdS.  .\ug..  1912. 

Warehouse    receipt — validity   as    pledge 

1078.  (Ariz.)  A  milling  company  own- 
ing three  warehouses  issued  receipts  uj)on  its 
own  grain  and  pledged  tlie  receipts  to  a  bank 


133 


1079 


DIGEST  OF  LEGAL  OPINIONS 


as  security  I'ur  a  loan.  In  the  event  of  tlie 
bankruptcy  of  the  conij)any,  the  bank  wishes 
to  hold  tiie  grain  as  a.^^ainst  the  bankrupt's 
creditors.  Opinion:  Warehouse  receipts  is- 
sued by  grain  warehouseman  on  his  own  goods 
in  store  are  generally  held  invalid  and  are  in- 
sullicicnt  security  to  a  bank  as  against  the 
trustee  in  bankruptcy  of  the  issuing  ware- 
houseman. An  additional  provision  might 
be  framed  in  connection  with  the  Uniform 
Warehouse  Receipts  Act,  when  presented  for 
enactment  in  Arizona,  which  in  substance 
would  validate  receipts  of  warehousemen, 
whether  or  not  issued  for  their  own  grain  in 
store,  upon  a  proper  system  of  registry  of 
such  receipts.     Vol.  4,  p.  4S7,  Feb.,  1912. 

1079.  (Kan.)  The  following  note  is  sub- 
mitted and  the  question  raised  as  to  its  nego- 
tibility  and  eligibility  for  rediscount  by  a 
Federal  Eeserve  Bank: 

"     $5,000  Topeka,  Kansas, 

Sept.  16,  1918. 

Ninety days  after  date  we  promise  to 

pay  to  the  order  of  ourselves  Five  Thousand 
Dollars  at  First  National  Bank,  Topeka, 
Value  Received.  Having  deposited  as  col- 
lateral security  Warehouse  Receipt  No.  1721, 
of  even  date  covering  3,000  bushels  of  wheat 
which  the  holder  of  this  note  is  authorized 
to  sell,  etc.,  in  case  of  non-payment. 

The  A.  B.  Milling  Company, 

By  John  Doe,  President. 
Attest :  John  Roe, 

Secretary. 
Indorsements  by  the  Company  and  Joe  Doe, 
President  and  John  Roe,  Secretary." 
Opinion :  A  note  which  contains  a  provision 
authorizing  sale  of  collateral  upon  non-pay- 
ment is  negotiable  but  where  the  note  is  issued 
by  a  warehouse  corporation  to  its  own  order 
and  is  secured  by  a  warehouse  receipt  issued 
by  the  same  corporation  it  is  ineligible  for  re- 
discount by  a  Federal  Reserve  Bank.  The 
Federal  Reserve  Board  has  ruled  that  paper 


secured  by  warehouse  receipts  may  be  redis- 
(;ounted  if  otherwise  eligible,  Ijut  the  ware- 
house receipt  must  be  issued  by  a  warehouse 
which  is  independent  of  the  borrower.     \'ol. 

11,  ]K  -i]  1,  Oct.,  1918. 

1080  (Wash.)  A  bank  loans  money  upon 
the  security  of  whiskey  certificates  issued  by 
the  proprietor  of  a  bonded  warehouse  repre- 
senting his  own  whiskey.  The  warehouse- 
man goes  into  bankruptcy.  Opinion:  Under 
a  recent  decision  the  pledge  of  such  whiskey 
certificates  is  valid  and  protects  the  bank  as 
against  tiie  trustee  in  bankruj)tcy.  Such 
certificates  are  distinguishable  from  ware- 
house receipts  for  grain  or  flour  issued  by  a 
warehouseman  upon  his  own  goods,  pledge 
of  which  is  invalid  as  against  creditors.  The 
delivery  of  the  last  stated  certificates  does 
not,  while  that  of  bonded  warehouse  receipts 
does,  operate  as  delivery  of  the  goods,  suffi- 
cient to  constitute  a  valid  pledge.  Vol.  4, 
p.  214,  Oct.,  1911. 

1081.  (Wash.)  A  bank  loaned  money 
upon  the  security  of  warehouse  receipts  for 
grain  and  flour,  issued  by  the  warehouseman 
to  himself.  The  warehouseman  became 
bankrupt.  Opinion:  Such  receipts  are  in- 
valid as  against  creditors  and  the  trustee  in 
bankruptcy,  and  do  not  protect  the  bank. 
Vol.  4,  p.  150,  Sept.,  1911. 

War  Savings  Certificates  as  collateral 
security 

1082.  (Miss.)  Several  customers  of  a 
bank  desire  to  pledge  their  War  Savings 
Stamps  as  security  for  payment  of  notes  given 
for  the  balance  of  the  purchase  money  of  such 
stamps.  Opinion:  W^ar  Savings  Certificates 
cannot  be  lawfully  pledged  to  a  bank  by  the 
owner  whose  name  appears  therein  as  col- 
lateral security  for  a  loan,  in  view  of  the  con- 
dition therein  that  the  certificate  is  "not 
transferable."     Vol.  11,  p.  170,  Sept.,  1918. 


POST  DATED  CHECKS 


Duty  of  collection 

1083.  (N.  C.)  Wliere  a  bank  receives 
for  collection  and  returns  a  post  dated  check, 
it  is  no  part  of  its  duty  to  present  the  same 
for  acceptance.  It  can  either  hold  it,  pre- 
sent it  at  maturity,  or,  if  time  permits,  may 
return  it  at  once  with  advice  that  it  is  not 
yet  due.     Vol.  2,  p.  230,  Dec,  1909. 


Payment  of  post  dated  checks 

1084.  (Ind.)  It  is  not  illegal  to  date  a 
check  ahead  but  if  a  post  dated  check  is  paid 
before  its  date,  the  pa3'ment  is  at  the  risk  of 
the  bank.     Vol.  3,  p.  468,  Feb.,  1911. 

1085.  (Mo.)  A  bank  pays  a  post  dated 
check  and  subsequently  checks  correctly  dated 
are  presented  and  refused  on  account  of  in- 


134 


POST-DATED  CHECKS 


1096 


sufiRcient  funds.  Opinion:  Pa\Tiient  of  the 
post  dated  check  before  its  date  is  at  the  risk 
of  the  bank,  which  has  no  right  to  charge  it 
up  against  the  customer  before  the  due  date, 
nor  to  refuse  checks  which  would  be  good  l)ut 
for  such  premature  charge.  Vol.  4,  p.  430, 
Jan.,  1912. 

1086.  (N.  C.)  A  bank  paid  its  custom- 
er's post  dated  check  for  $100  seven  days  be- 
fore its  date.  When  a  second  clieck  of  $3 
was  presented  tlie  bank  refused  payment  be- 
cause of  insufficient  funds.  The  customer 
sued  the  bank  for  damages.  Opinion:  The 
post  dated  check  was  not  payable  or  charge- 
able to  the  drawer's  account  until  the  day  of 
the  date  and  if  prematurely  paid  and  charged, 
a  refusal  to  pay  a  subsequent  check,  good  but 
for  the  erroneous  charge,  is  a  wrongful  dis- 
honor.    Vol.  9,  p.  48,  July,  1916. 

1087.  (Ohio.)  On  November  30  a  bank 
paid  a  check  dated  December  7  and  after- 
ward on  the  same  day  dishonored  a  check 
dated  November  29  because  of  "insufficient 
funds."  There  would  have  been  sufficient 
funds  but  for  the  payment  of  the  post  dated 
check.  Opinion:  The  bank  had  no  right  or 
authority  to  pay  the  post  dated  check  before 
the  day  of  its  date  arrived,  and  no  right  to 
refuse  payment  of  another  check  where  the 
funds  would  have  been  sufficient  except  for 
premature  payment  of  the  post  dated  check. 
The  wrongful  refusal  to  pay  the  check  sub- 
jects the  bank  to  damages  recoverable  by  the 
drawer,  but  the  holder  of  the  dishonored 
check  has  no  recourse  upon  the  bank  but  must 
look  to  the  drawer  and  prior  indorsers.  Vol. 
5,  p.  523,  Feb.,  1913. 

1088.  (Tenn.)  A  check  dated  June  1 
was  paid  on  ^fay  31.  The  maker  notified 
the  bank  on  the  morning  of  June  1,  before 
banking  hours,  to  stop  payment.  Opinion: 
The  money  prematurely  paid  by  the  bank  to 
a  bona  fide  holder  of  the  check  is  non-recover- 
able, but  the  bank,  notwithstanding  the  stop 
order  before  the  due  date,  would  probably 
have  the  right  to  charge  the  amount  to  the 
drawer's  account,  if  the  holdor  had  an  en- 
forceable right  against  the  drawer.  Vol.  9, 
p.  240,  Sept.,  1916. 

1089.  (Wash.)  A  gave  his  post  dated 
check  in  ])ayiucnt  for  supplies.  Yho  holder 
indorsed  it  for  value  to  B,  who  presented  it 
on  its  date.  Payment  was  refused  by  the 
drawee  because  A  had  previously  stopped  pay- 
ment. Opinion:  The  check,  although  post 
dated,  was  negotiable  before  the  day  of  its 
date,  and  B  wlio  purchased  before  maturity 


took  an  enforceable  title.  B  had  no  recourse 
upon  the  drawee  but  only  upon  the  drawer 
and  prior  indorser.  Vol.  7,  p.  779,  April, 
1915. 

Protest  of  post   dated   checks 

1090.  (Ga.)  A  check  dated  the  15th  of 
the  month  was  presented  on  the  12tii  and 
payment  was  refused.  Should  the  check  be 
protested?  Opinion:  There  is  no  legal  au- 
thority for  protesting  a  post  dated  check, 
payment  of  which  has  been  refused  on  pre- 
sentment before  the  due  date.  The  bank  on 
which  the  check  is  drawn  has  no  authority 
to  pay  the  same  until  the  day  of  its  date  ar- 
rives.    Vol.  9,  p.  496,  Dec,  1916. 

1091.  (La.)  A  post  dated  check  was  re- 
ceived by  a  bank  for  collection  thirty  days 
before  the  due  date  and  was  protested  and 
returned  in  accordance  witli  printed  advice 
accompanying  the  check.  The  forwarding 
bank  refuses  to  pay  the  fees  and  contends  the 
collecting  bank  was  in  error  in  protesting. 
Opinion:  The  drawee  causing  the  protest  can- 
not charge  protest  fees.  The  printed  advice 
to  protest  should  not  be  construed  to  cover  a 
post  dated  check  before  the  time  when  the 
check  becomes  payable.  Vol.  5.  p.  830,  June, 
1913. 

1092.  (Mich.)  After  the  day  of  its  date 
arrives  a  post  dated  check  is  i)rotestable  for 
non-payment,  the  same  as  an  ordinarv  check. 
Vol.  4,V  220,  Oct.,  1!»11. 

1093.  (Okla.)  A  post  dated  check  is  not 
presentable  until  the  day  of  its  date  arrives 
and  if  presented  before  such  date,  it  cannot 
be  protested  for  non-accei)tance.  Vol.  5,  p. 
244,  Oct.,  1912. 

1094.  (Tenn.)  A  firm  received  a  check 
dated  fifteen  days  after  it  was  received,  which 
it  deposited  for  collection.  The  check  was 
presented  before  it  was  due  and  was  protested 
by  the  drawee.  Opinion:  A  j)ost  dated  check 
is  not  payable  until  the  day  of  its  date  arrives, 
and  a  drawee  bank  which  prematurely  pro- 
tests the  post  dated  check  of  its  customer  does 
so  witiiout  legal  right  and  is  })rol)ably  liable 
to  him  in  damages  therefor.  Vol.  5.  p.  829, 
June.  1913. 

1095.  (Tenn.)  A  post  dated  check 
should  be  held  until  the  day  of  maturity, 
and  then  presented  and  protested  if  not  paid. 

Vol.  1,  p.  37").  Dec.  1011. 

Set  off  of  post  dated  check 

1096.  (Utah.)     A     bank     piireha«ed     a 


135 


1097 


DKJEST  OF  LECAL  OPINIONS 


post  dated   check  drawn  on   another  banlc,  count  in  tlie  purchasing  bank.     Opinion:  The 

from  an  indorser  in  due  course  before  ma-  bank  j)urchasjng  the  check  can  set  off  tlie 

turity.     In  due  time  it  was  returned  marked  drawer's    dejjosit    against    his    indebtedness 

"Payment  stopped,"     The  drawer  had  an  ac-  upon  the  ciieck.     Vol.  8,  p.  327,  Oct.,  1915. 


PRESENTMENT 


Due  diligence 

See  386  et  seq 


1097.  (Mont.)  A  bank  received  for  col- 
lection a  check  from  another  place  on  Thurs- 
day, and  presented  it  for  payment  on  Satur- 
day forenoon,  Friday  being  a  legal  holiday. 
The  check  was  dishonored,  although  it  could 
liave  been  paid  if  presented  on  Thursday. 
Opinion:  The  collecting  bank  was  not  liable 
for  not  presenting  the  check  on  the  day  it  was 
received,  unless  it  had  information  that  the 
drawee  was  approaching  insolvency  or  the 
case  required  extraordinary  diligence  on  the 
part  of  the  bank  in  protecting  its  principal. 
Vol.  7,  p.  780,  April,  1915. 

Presentment  over  telephone 

1098.  (Ark.)  A  bank  receiving  a  sight 
draft  on  a  person  living  three  miles  away  tele- 
phoned him  at  his  home,  there  being  no  bank 
in  his  town.  He  was  reported  to  be  absent 
quite  a  distance  and  not  being  able  to  locate 
him,  the  bank  liad  the  item  protested  for 
non-payment.  Opinion:  Presentment  and 
demand  of  payment  of  a  sight  draft  over  the 
telephone  is  not  legally  sufficient  and  protest 
for  non-payment  in  such  a  case  is  unauthor- 
ized. It  has  been  held  that  as  presentment 
must  be  made  by  actual  exhibition  of  the 
paper  or,  at  least,  by  some  clear  indication 
that  the  paper  is  at  hand  ready  to  be  de- 
livered, a  demand  over  the  telephone  at  the 
place  specified  in  the  instrument  is  insuffi- 
cient.    Vol.  10,  p.  657,  March,  1918. 

1099.  (W.  Va.)  A  demand  of  payment 
of  a  negotiable  instrument  over  the  telephone 
by  a  notary  is  insufficient  legally  to  justify  a 
protest.  It  requires  his  personal  attendance 
with  the  note  at  the  place  of  demand,  in  read- 
iness to  exhibit  it  if  required,  and  to  receive 
payment  and  surrender  it  if  the  debtor  is 
willing  to  pay.     A^ol.  4,  p.  93,  Aug.,  1911. 

Place  of  presentment 

See  1024 

1100.  (Kan.)  x\n  indorsed  note  was 
made  payable  at  a  bank,  but  presentment  was 
made  to  the  maker  in  person,  and  then  pro- 
tested.    The  indorser   seeks  to  recover  the 


protest  fees  from  the  payee.  Opinion: 
Where  an  indorsed  note  is  made  payable  at 
a  bank,  presentment  for  payment  must  be 
made  at  the  specified  place  in  order  to  hold 
an  indorser  and  where  the  note  is  not  pre- 
sented at  the  bank,  but  to  the  maker  person- 
ally, and  then  protested,  the  instrument  is 
not  duly  presented  and  the  protest  unauthor- 
ized.    Vol.  10,  p.  43,  July,  1917. 

1101.  (Miss.)  A  draft  drawn  on  the 
County  Treasurer  was  presented  to  the  Treas- 
urer's depository  in  another  town  where  it 
is  customary  to  present  all  drafts  drawn  on 
the  Treasurer.  Payment  was  refused  because 
of  "no  funds  in  general  deposit"  and  the 
draft  was  duly  protested.  Opinion:  The 
presentment  was  sufficient  and  the  protest  for 
non-pavment  was  legal  and  valid.  Vol.  4,  p. 
219,  Oct.,  1911. 

1102.  (N.  H.)  A  note  is  made  payable 
at  the  office  of  the  makers  at  a  particular 
street  address,  and  before  maturity  the 
makers  have  closed  their  office  and  moved  to 
another  street.  Opinion:  To  hold  an  in- 
dorser, presentment  at  the  place  specified  in 
the  note  would  be  sufficient ;  but  where  notary 
knows  the  makers  are  at  a  new  address,  it 
would  be  safer  to  make  a  supplemental  pre- 
sentment at  that  place.  Vol.  4,  p.  434,  Jan., 
1912. 

1103.  (Okla.)  Presentment  of  a  draft 
to  bank  in  whose  care,  or  through  which,  it  is 
made  payable,  is  sufficient  and  authorizes 
protest  in  the  event  of  non-pa}Tnent  without 
necessity  of  further  presentment  to  the 
drawee.    Vol.  3,  p.  583,  April,  1911. 

1104.  (S.  C.)  A  draft  was  addressed  to 
the  drawee  "Jno.  Jones,  Jonesville,  S.  C, 
care  Dime  Bank,  Barnwell,  S.  C."  The  col- 
lecting bank  presented  it  at  the  Dime  Bank. 
Opinion:  Presentment  at  the  Dime  Bank  was 
proper  and  sufficient.  Vol.  3,  p.  339,  Dec, 
1910. 

Reasonable  time  for  presentment 
See  352 

1 105.  (Idaho.)  A  gave  B  a  note  of  $100 
payable  in  one  year  from  date,  bearing  in- 
terest at  10  per  cent,  payable  annually.  After 
the  expiration  of  a  year  B  indorsed  the  note 


136 


PRESENTMENT 


[  nil 


over  to  C  for  value,  and  one  year  later  the 
note  is  presented  to  A  for  payment  and  re- 
fused. Opinion:  B's  indorsement  of  a  past 
due  note  was  valid,  making  it  a  demand  in- 
strument. The  delay  of  one  year  in  demand- 
ing payment,  under  the  circumstances,  was 
unreasonable,  and  the  indorser  was  dis- 
charged.    Vol.  4,  p.  155,  Sept.,  1911. 

1106.  (Kan.)  A  check  must  be  pre- 
sented within  a  reasonable  time,  but  the  ex- 
act period  of  time  after  which  a  check  be- 
comes stale  or  discredited  and  puts  a  pur- 
chaser or  a  bank  of  payment  upon  inquiry,  is 
not  definitely  fixed  by  the  authorities.  A 
check  becomes  outlawed  according  to  the 
Statute  of  Limitations  of  each  state.  But 
there  is  some  divergence  of  opinion  of  differ- 
ent courts  as  to  whether  the  statute  begins 
to  run  from  the  date  of  a  check  or  from  a 
reasonable  time  after  date  or  from  a  time 
after  date  beginning  with  the  end  of  the  stat- 
utory period.     Vol.  8,  p.  910,  April,  191G. 

1107.  (Ore.)  Where  a  check  is  issued 
and  delivered  in  the  place  where  the  drawee 
is  located,  the  well  established  rule  adopted 
by  the  courts  is  that  under  the  Negotiable 
Instruments  Act  the  reasonable  time  for  pre- 
sentment to  hold  the  drawer  ends  with  the 
next  business  day  after  delivery  of  the  check. 
This  rule  applies  to  a  bank  in  which  the 
I^ayee  deposits  a  check  for  collection  drawn 
upon  another  bank  in  tlie  same  place.  There 
is  no  rule  which  would  require  the  collecting 
bank  to  make  presentment  the  same  day  of 
deposit,  in  the  absence  of  some  specific  in- 
struction from  its  depositor  so  to  do.  Where 
there  exists  a  custom  of  presentment  through 
a  clearing  house  in  any  city  or  town,  accord- 
ing to  the  rule  in  some  courts,  such  method 
is  within  the  requirements  of  diligence,  and 
as   illustrated   in   a   Pennsylvania   case   the 


drawer  will  remain  liable,  although  the  check 
was  not  presented  until  the  third  business 
day  following  delivery.  But  a  Nebraska 
case  refused  to  follow  this  decision  and  re- 
quired presentment  by  the  payee  the  follow- 
ing day.  A  Texas  case  held  that  the  drawer 
was  discharged  where  there  was  presentment 
through  a  clearing  house  on  the  third  day 
because  he  had  not  impliedly  consented  and 
was  entitled  to  have  his  check  presented  di- 
rectly to  the  drawee  not  later  tban  tlie  day 
following  its  delivery.  The  payee,  however, 
who  deposited  the  check  was  bound  by  the 
custom  by  reason  of  his  implied  consent. 
Vol.  9,  p.' 746,  March,  1917. 

1108.  (Pa.)  Presentment  of  a  note 
payable  on  demand  must  be  made  within  a 
reasonable  time  after  its  issue  to  liold  the  in- 
dorser. In  determining  what  is  reasonable 
time,  regard  is  to  lie  had  to  the  nature  of 
the  instrument,  the  usage  of  trade  or  busi- 
ness, if  any,  with  respect  to  such  instruments, 
and  the  facts  of  the  particular  case.  Vol.  4, 
p.  156,  Sept.,  1911. 

When  presentment  excused 

1109.  (N.  C.)  A  made  his  note  payable 
to  the  order  of  B  and  indorsed  before  de- 
livery, presumably  for  accommodation,  by 
C.  C  negotiated  the  note  to  Y  bank.  The 
note  was  not  presented  on  the  day  of  ma- 
turity. Opinion:  Presentment  on  the  day  of 
maturity  and  notice  of  dishonor  are  required 
to  hold  B  and  C,  the  indorsers,  but  if  the  in- 
strument was  made  for  the  accommodation 
of  either  B  or  C,  and  such  indorser  had  no 
reason  to  expect  it  would  he  paid  if  presented, 
neither  presentment  nor  notice  is  required 
to  hold  such  indorser  liable.  Vol.  8,  p.  324, 
Oct.,  1915. 


1110. 


PROTEST 

Altered   check 
(N.    J.)     A    check,    the    date    of 


which  was  apparently  altered,  was  presented 
for  payment  and  was  refused  by  the  drawee- 
0 pinion:  The  safer  course  for  the  collecting 
bank  was  to  protest  the  check  for  non-pay- 
ment, although  such  protest  would  not  be 
necessary  if  it  later  developed  that  the  alter- 
ation was  not  authorized  and  the  instrument 
was  not  valid.     Vol.  5,  p.  217,  Oct.,  1912. 

Certificate  of  protest 
(N.   C.)     Bank  C   received  a  de- 


1111 

mand  draft  witli 


)ill  of  lading  for  collection 


and  caused  the  item  to  be  protested.  The 
notices  were  drawn  regularly  by  one  of  the 
clerks  of  C  bank  and  signed  hy  him  in  the 
name  of  the  cashier  of  C  hank  who  is  the 
notary.  The  forwarding  liank  refused  to  pay 
the  protest  fee,  saying  that  the  notices  and 
protest,  altliough  signed  in  the  name  of  the 
cashier  and  notary,  are  not  in  his  handwrit- 
ing. Opinion:  A  certificate  of  protest  signed 
in  the  name  of  the  notary  hy  his  clerk  is  of 
doubtful  validity.  The  Negotiable  Instru- 
ments .\ct  provides  that  the  protest  "must  be 
under  the  hand  and  seal  of  the  notary  making 
it.''      The    law    rt><iiiir«^-:    thnt    demand    and 


137 


1112 


UKJEIST  OF  LK(iAl.  OiMXlONS 


notice  must  I)e  Ity  the  notary  personally,  and 
eannot  be  delcf^'ated  to  a  elcrk,  except  that  a 
lew  eases  reco;;nize  the  custom  for  a  clerk  to 
act,  hut  the  validity  of  the  custom  is  uncer- 
tain.    Vol.  7,  p.  493,  Jan.,  1915. 

1112.  (111.)  Tn  Illinois  the  certificate 
of  protest  of  a  foreign  notary  is  competent 
evidence  of  the  dishonor  of  a  forci;j;n  hill  of 
exchange  by  virtue  of  the  common  law  rule; 
hut  the  certificate  of  a  foreign  notary  as  to 
demand  and  notice  in  case  of  a  promissory 
note  is  not  competent  evidence  and  addition- 
al legislation  is  necessary  to  effect  this.  The 
certificate  of  protest  of  a  notary  within  the 
state  is  competent  evidence  of  demand,  dis- 
honor and  notice  in  case  of  inland  hills,  notes 
and  checks  by  virtue  of  Sections  ]2  and  13 
(unrepealed)  of  tlie  Act  of  187-2,  notwith- 
standing the  repeal  of  Sections  10  and  11  of 
that  act  bv  tlie  Negotiable  Instruments 
Law.     Vol.  3,  p.  516,  March,  1911. 

Checks  payable  in  one  state  and  negoti- 
ated in  another 

See  335,   330,    1148 

1113.  (S.  Dak.)  A  check,  as  shown  on 
its  face,  was  drawn  and  payable  in  South  Da- 
kota, and  was  issued  and  negotiated  in  Illi- 
nois. Opinion:  Protest  of  the  check  is  per- 
missible but  is  not  required  by  the  Negotiable 
Instruments  Act,  even  though  the  check  was 
issued  in  one  state  and  negotiated  in  another. 
Vol.  6,  p.  438,  Dec,  1913. 

Payment  of  protested  check 

See   1121,    1154,   1155,   1156 

1114.  (Ala.)  A  check  was  presented  and 
protested  for  non-payment  on  account  of  in- 
sufficient funds.  Later,  the  bank  when  in 
funds,  without  express  instructions  from  the 
drawer,  paid  the  check  with  the  notary's  fees. 
Opinion:  The  bank  in  paying  the  check  acted 
at  its  peril  and  should  have  refused  payment. 
Vol.  7,  p.  688,  March,  1915. 

Drawee's  duty  of  protest 

1115.  (Miss.)  A  authorized  B  to  sign 
a  check  drawn  on  C  bank.  The  check  signed 
"B  by  A"  was  presented  through  the  clearing 
house  and  the  drawee,  ignorant  of  A's  author- 
ity, refused  payment  and  protested  the  item 
because  of  the  signature.  Opinion:  The 
drawee  rightfully  refused  payment  and  the 
check  being  genuine  and  not  a  forgery,  its 
protest  "was  justifiable.  The  presenting  bank 
rather  than  the  drawee,  was  the  proper  one 
to  hand  the  check  over  to  the  notary  for  pro- 
test.    Vol.  2,  p.  333,  Feb.,  1910. 


1116.  (Wis.)  A  check  for  $160  was 
drawn,  f)ayal)le  by  A  to  B,  who  deposited  it 
for  cdlh'ction.  The  check  was  forwarded  di- 
rectly to  the  draw('(!  bank,  where  payment  was 
stop[)ed  by  A.  The  drawee  questions  the  ad- 
visability of  protesting  the  check  for  non- 
payment. Opinion:  The  drawee  would  not 
be  responsible  in  omitting  protest,  as  protest 
is  not  necessary  in  this  case,  there  being  no 
contingent  j)arti('s  to  be  held  liable.  Vol.  8, 
p.  805,  JIarch,  1916. 

1117.  (V/is.)  A  drawee  bank  which  re- 
ceives a  check  for  collection  acts  in  a  dual 
capacity,  (1)  as  agent  of  the  drawer  to  pay 
or  refuse  payment,  (2)  as  agent  of  the  holder 
to  collect  and  remit  or  to  take  the  necessary 
steps  upon  dishonor  to  hold  parties  contin- 
gently liable.     Vol.  8,  p.  805,  March,  1916. 

Duty   of   collecting   bank 
S€e  395,  306,   113!),    1145 

1118.  (La.)  The  payee  of  a  check  de- 
posits it  in  his  Ijank  for  collection  and  before 
the  item  is  presented  goes  to  the  town  of  the 
drawee  and  asks  the  latter  if  it  will  pay  the 
same  when  it  comes  through  the  regular 
channels.  The  drawee  promises  to  hold  the 
check  awaiting  a  deposit  by  the  drawer,  there 
being  insufficient  funds  at  the  time.  When 
the  check  was  presented,  the  drawee  returned 
it  unpaid,  because  of  insufficient  funds,  with- 
out protesting  it.  The  payee  wants  to  hold 
the  drawee  for  not  protesting.  Opinion: 
Drawee  bank  not  liable  to  payee  of  check  for 
omission  to  protest  before  returning  unpaid 
because  of  insufficient  funds.  In  this  case 
the  check  was  owned  by  the  payee,  and  there 
was  no  discharge  of  parties  contingently  liable 
and  no  loss  resulted  to  the  payee  from  the 
bank's  omission  to  protest.  Bank's  promise 
to  hold  check  awaiting  deposit  by  drawer  is 
not  binding  on  bank,  not  being  an  acceptance 
nor  supported  by  a  consideration.  Vol.  10, 
p.  124,  Aug.,  1917. 

1119.  (Okla.)  A  collecting  bank  is 
bound  by  law  to  exercise  reasonaljle  diligence 
in  making  presentment  and  taking  the  neces- 
sary steps  upon  dishonor  to  hold  parties  con- 
tingently liable  upon  the  paper.  In  case  of 
a  small  check  under  $10  payable  in  the  same 
state,  in  the  absence  of  instructions  it  might 
be  proper  to  omit  protest  and  merely  give 
due  notice  of  dishonor.  Vol.  4,  p.  153,  Sept., 
1911. 

Protest  fees 
See  013,    1091 

1120.  (Ala.)  A  note  was  payable  to  a 
firm  at  a  bank  in  Alabama.     The  payees  sent 


138 


PROTEST 


1129 


the  note  to  the  hauk  for  collection,  and  be- 
cause payment  was  not  promptly  made  the 
note  was  protested.  The  bank  claimed  that 
it  is  entitled  to  the  amount  expended  for  pro- 
test fee.  Opinion:  It  is  doubtful  if  the  bank 
is  entitled  to  the  protest  fees,  as  in  an  action 
on  the  note  by  the  payees  a^rainst  the  maker 
it  is  not  necessary  to  prove  demand  and  notice 
and  the  certificate  of  protest  would  have  no 
utility  as  an  item  of  evidence.  Vol.  6,  p.  436, 
Dec,  1913. 

1121,  (Wash.)  A  depositor  before  leav- 
ing town  withdrew  his  balance  at  his  bank, 
and  when  a  check  in  the  sum  of  $38.50  was 
presented  it  was  protested  for  non-payment. 
Later  a  deposit  was  made  more  than  enough 
to  cover  the  check  and  protest  fees,  and  the 
bank  paid  the  check  but  refused  to  pay  the 
fees.  Opinion:  The  bank  without  express  in- 
structions is  not  authorized  to  pay  the  protest 
fees  on  the  protested  check  of  the  customer. 
Vol.  3,  p.  588,  April,  1911.  See  1114,  1154, 
1155,  1156. 

Protest  for  better  security 

1122.  (Miss.)  Section  158  of  the  Ne- 
gotiable Instruments  Act  provides :  "Where 
the  acceptor  has  been  adjudged  a  bankrupt  or 
an  insolvent,  or  has  made  an  assignment  for 
the  benefit  of  creditors,  before  the  bill  ma- 
tures, the  holder  may  cause  the  bill  to  be  pro- 
tested for  better  security  against  the  drawer 
and  indorsers."  Section  161  of  the  Act  pro- 
vides: "Where  a  bill  of  exchange  has  been 
protested  for  dishonor  by  non-acceptance  or 
protested  for  better  security,  and  is  not  over- 
due, any  person  not  being  a  party  already 
liable  thereon  may,  with  the  consent  of  the 
holder,  intervene  and  accept  the  bill  supra 
protest  for  the  honor  of  any  party  liable  there- 
on, or  for  the  honor  of  the  person  for  whose 
account  the  bill  is  drawn."  The  utility  of 
this  kind  of  protest  seems  to  lie  in  the  fact 
that,  wlien  the  acceptor  becomes  a  bankrupt, 
the  causing  of  protest  for  better  security  and 
giving  of  notice  thereof  to  the  drawer  and 
prior  indorsers,  will  enable  him  or  tlieni  to 
procure  some  friend  or  correspondent  to  ac- 
cept the  bill,  supra  protest,  for  their  honor. 
The  Negotiable  Instruments  Act,  while  au- 
thorizing a  protest  for  better  security,  fails 
to  specify  the  requirements  of  such  a  protest. 
It  would  seem  that  a  certificate,  made  under 
the  hand  and  seal  of  the  Tiotary,  conlniniTig 
a  copy  of  the  bill  or  liaving  the  original  bill 
annexed  tliereto,  which  sboidd  recite  (foHow- 
ing  as  closely  as  possible  the  language  of  the 
Act)    that  the  acceptor  has  been   adjudged 


bankrupt  before  the  bill  has  matured,  for 
which  cause  the  bill  is  protested  for  better 
security  against  the  drawers  and  indorsers, 
would  be  sufficient.  Vol,  9,  p.  494,  Dec., 
1916. 

Forged  checks 

1123.  (Ind.)  A  check  bearing  a  forged 
signature  or  one  made  without  authority  of 
the  j)erson  whose  signature  it  purports  to  be, 
is  not  a  valid  negotiable  instrument,  but  a 
void  document,  and  it  is  not  properlv  protest- 
able.     Vol.  9,  p.  414,  Nov.,  1916. 

1124.  (Fla.)  Protest  of  a  forged  check 
is  not  necessary ;  the  indorser  thereon 
warrants  that  the  check  is  genuine  to  all 
holders  in  due  course,  and  is  liable  without 
demand,  protest  or  notice.  Vol.  2,  p.  332, 
Feb.,  1910. 

1125.  (Wis.)  A  forged  check  is  not 
properly  protestable  nor  is  demand  and  notice 
of  dishonor  necessary  to  hold  an  indorser  who 
is  liable  to  an  indorsee  as  warrantor  of  genu- 
ineness. An  agent  holding  such  paper  is  duly 
diligent  by  giving  notice  of  the  forgery  with- 
in reasonable  time.  Vol.  5,  p.  760,  Mav. 
1913. 

Formal  protest 

1126.  (N.  J.)  Formal  protest  as  distin- 
guished from  demand  and  notice  of  dishonor 
is  not  required  to  hold  indorser  unless  the 
instrument  is  foreign  bill  of  exchange.  Vol. 
6,  p.  376,  Nov.,  1913. 

1127.  (Wash.)  The  object  of  permit- 
ting j)rotcst  of  inland  liills  is  to  enal)le  the 
holder  to  obtain  a  convenient  means  of  prov- 
ing dishonor  in  case  he  is  comindled  to  bring 
suit  on  the  paper,  as  the  notary's  certificate 
of  protest  is  admitted  as  prima  facie  evidence 
to  prove  dishonor  and  obviate  the  necessity  of 
calling  witness  and  proving  that  fact  bv  other 
evidence.     Vol.  4,  p.  151,  Sept.,  1911. 

1128.  (Wis.)  Protest  is  only  required 
in  case  of  foreign  bills  of  exchange,  but  is  per- 
missible on  inland  bills  and  checks,  and  the 
drawer  and  indorser  are  liable  for  the  protest 
fee.     Vol.  4,  p.  617,  April,  1912. 

Indorsement  of  check  incorrect 

1129.  (Pa.)  To  authorize  the  protest  of 
a  check,  it  must  be  "duly"'  presented  for  pay- 
ment. The  holder  under  an  "incorrect  in- 
dorsement'' is  not  entitled  to  demand  pay- 
ment ;  hence  there  can  be  no  due  presentment 
of  such  a  check  and  no  dishonor  by  non-pay- 
ment which  would  authorize  a  protest.  Vol. 
4,  p.  307,  Nov.,  1911. 


139 


1130 


DIGEST  OF  LEGAL  OPINIONS 


1130.  (Wash.)  A  check  sif^nicd  l)y  Jolm 
Doc  in  favor  of  Will  .loiies,  guardian  of  Elsie 
Smith,  was  indorsed  by  Will  Jones  only.  On 
presentment  of  the  cheek  payment  was  re- 
fused because  of  the  incomplete  indorsement. 
The  collectinu:  baid<  then  protested  the  check. 
Opinion:  The  question  is  an  nnccrtain  one 
wlielhcr  the  indorsement  of  "Will  Jones" 
without  addiiif]^  his  representative  capacity  is 
a  proper  indorsement.  Where  a  clieck  is  pre- 
sented bearing  an  improper  or  defective  in- 
dorsement of  the  payee  and  payment  is  re- 
fused for  that  reason,  there  is  no  due  present- 
ment and  no  dishonor  which  justified  protest. 
Tol.  fi,  p.  629,  March,  1914. 

Indorsement  on  instrument  lacking 

1131.  (Ga.)  Where  a  check  is  presented 
by  a  third  person  without  the  indorsement  of 
the  payee  and  payment  is  refused  for  that 
reason,  such  refusal  is  not  a  dishonor  which 
would  justify  a  protest.  To  constitute  dis- 
honor it  is  essential  that  there  be  due  pre- 
sentment of  the  check  and  it  cannot  be  said 
that  a  check  without  indorsement  of  the 
payee  and  presented  by  a  third  person  is  duly 
presented  because  the  payee's  indorsement 
which  is  the  order  and  authority  to  the  bank 
to  pav  the  holder,  is  lacking.  Vol.  9,  p.  496, 
Dec.,l916. 

1132.  (Ga.)  When  a  check,  payable  to 
order,  is  presented  by  a  holder  other  than  the 
payee,  lacking  the  payee's  indorsement,  there 
is  no  due  presentment  and  protest  thereof 
cannot  be  properly  made,  irrespective  of 
whether  or  not  there  are  sufficient  funds. 
YoL  3,  p.  149,  Sept.,  1910.     See  669. 

1133.  (Kan.)  A  grain  dealer  in  Okla- 
homa drew  a  draft  on  a  firm  in  Kansas.  He 
attached  thereto  a  bill  of  lading  and  depos- 
ited it  in  his  bank  for  credit.  On  present- 
ment through  the  Kansas  City  Clearing 
House,  payment  was  refused  because  the  grain 
dealer  failed  to  indorse  the  bill  of  lading. 
The  question  was  raised  whether  the  draft 
should  have  been  protested.  Opinion:  In  the 
absence  of  instructions  not  to  protest,  the 
draft  should  have  been  protested  upon  dis- 
honor.    Vol.  6,  p.  374,  Nov.,  1913. 

1134.  (Okla.)  A  check  payable  to  order 
was  presented  without  the  indorsement  of 
the  payee.  It  was  protested  and  returned 
for  indorsement.  Opinion:  The  protest  was 
not  justifiable.  The  refusal  to  pay  a  check 
presented  by  a  subsequent  holder  because  it 
lacks  the  indorsement  of  the  payee  is  not  a 


dishonor.     Vol.  4,  p.  684,  May,  1012.     See 
669. 

Inland  and  foreign  bills  of  exchange 
distinguished 

S.'<;   IMS 

1135.  (Tenn.)  A  check  drawn  and  pay- 
able in  the  same  state  is  an  iidand  bill  of  ex- 
change and  not  a  foreign  bill,  although  the 
payee  is  located  in  another  state,  and  protest 
uf)on  dishonor,  while  customary,  is  not  indis- 
j)ensable  as  in  case  of  a  foreign  bill  of  ex- 
change.    Vol.  6,  p.  818,  June,  1914. 

1136.  (S.  Dak.)  A  check  which  origi- 
nates and  is  payable  in  the  same  state,  there- 
fore called  an  inland  bill  of  exchange,  through 
the  course  of  clearing  happens  to  be  indorsed 
in  another  state.  Under  the  Negotiable  In- 
struments Law  which  does  not  require  protest 
in  case  of  non-payment  of  inland  bills  of  ex- 
change, it  is  asked  if  the  check  in  question 
has  become  a  foreign  bill  of  exchange  which 
would  require  such  protest.  Opinion:  A 
check  drawn  in  one  state  upon  a  bank  in  the 
same  state  does  not  become  a  foreign  bill  of 
exchange  because  indorsed  in  another  state, 
so  as  to  make  protest  necessary  to  preserve 
recourse  upon  parties  contingently  liable. 
Vol.  10,  p.  467,  Dec,  1917. 

Instructions  to  protest 
See    395,    396 

1137.  (La.)  A  bank  received  a  draft  for 
collection,  accompanied  by  a  letter  "We  en- 
close for  collection  and  credit.  Items  marked 
X  no  protest."  The  bank  protested  the  draft 
(not  marked  X)  but  the  sending  bank  re- 
fused to  pay  the  protest  fee.  Opinion:  The 
collecting  bank  was  justified  in  protesting  the 
draft  and  could  collect  the  protest  fees.  Vol. 
5,  p.  102,  Aug.,  1912. 

1138.  (Miss.)  A  collecting  bank  re- 
ceived a  check  upon  which  was  stamped  "no 
protest,"  and  the  letter  enclosing  the  item  in- 
structed the  same  to  be  protested.  Opinion: 
The  safer  course  for  the  collecting  bank  was 
to  protest.     Vol.  3,  p.  521,  Marcli,  1911. 

1139.  (Pa.)  A  promissory  note  con- 
tained two  indorsers  for  value,  only  the  first 
of  whom  has  waived  over  his  signature  pro- 
test and  notice  of  protest.  On  the  face  of 
the  note  was  the  written  instruction  "protest 
if  not  paid,"  The  note  was  received  by  the 
collecting  bank  five  days  after  maturity  and 
was  protested  after  the  maker  stated  his  in- 
ability to  pay.     The  bank  did  not  know  the 


140 


PEOTEST 


[1151 


circumstances  of  the  delay  in  presentment. 
Opinion:  Had  the  instrument  been  a  foreign 
bill  of  exchange,  the  collecting  bank  would 
have  been  justified  in  making  protest  to  safe- 
guard the  interest  of  its  principal,  in  case  the 
delay  was  excusable.  In  the  case  of  a  prom- 
issory note,  while  formal  protest  is  not  essen- 
tial, it  is  a  convenient  means  of  proving  dis- 
honor, and  as  the  note  contained  tlie  positive 
instruction  "protest  if  not  paid"  the  collect- 
ing bank  was  justified  in  assuming  that  the 
principal  desired  the  protest  made  and  knew 
of  facts  which  would  justify  the  delay  and 
make  the  protest  efficacious.  Vol.  8,  p.  145, 
Aug.,  1915. 

Instrument  must  be  negotiable 

1140.  (Ala.)  A  county  warrant  pro- 
viding for  payment  of  money  out  of  a  par- 
ticular fund  is  not  negotiable  under  the  Ne- 
gotiable Instruments  Law  and  is  not  subject 
to  protest.     Vol.  7,  p.  304,  Nov.,  1914. 

1141.  (111.)  A  check  is  drawn  on  a  bank 
that  does  not  exist.  Question  was  raised  as 
to  the  legality  of  protesting  such  an  instru- 
ment. Opinion:  A  check  drawn  on  a  bank 
that  does  not  exist  is  a  negotiable  instrument 
and  is  subject  to  protest  under  the  Negotia- 
able  Instruments  Act.  Vol,  10,  p.  595,  Feb., 
1918. 

1142.  (Kan.)  By  agreement  with  its 
customer  a  bank  stamped  its  checks  "payable 
in  Kansas  City  Exchange."  The  holder  of 
such  cliecks  demanded  cash,  but  only  Kansas 
City  Exchange  was  tendered.  The  question 
was  raised  whether  the  holder  could  refuse 
the  tender  of  exchange  and  protest  the  check 
if  not  paid  in  money.  Opinion:  The  checks 
are  not  payable  in  cash  but  in  drafts  on  Kan- 
sas City,  and  the  holder  cannot  have  the 
checks  protested.  All  doubt  as  to  whether 
the  checks  would  be  payable  in  money  would 
be  removed  if  the  stamp  read :  "Payable  by 
the  drawee's  draft  on  Kansas  City."  Vol.  6, 
p.  95,  Aug.,  1913. 

1143.  (N.  Y.)  A  check  on  a  savings 
bank  payable  "on  presentation  of  the  pass- 
book" was  presented  for  payment  unaccom- 
panied by  the  book.  The  bank  refused  pay- 
ment on  the  ground  that  the  presentation 
was  incomplete  and  did  not  think  it  necessary 
to  protest  tlie  chock.  Opinion:  The  check 
was  not  negotiable  and  therefore  not  subject 
to  protest.     Vol.  6,  p.  210,  Sept.,  1913. 

1144.  (N.  Y.)  An  undated  negotiable 
check  was  presented  for  payment  at  a  savings 


bank.  The  bank  protested  the  item  for  non- 
payment because  of  non-production  of  the 
pass-book.  Opinion:  The  check  was  properly 
protestable  and  its  negotiable  character  was 
not  affected  by  the  fact  that  it  was  undated. 
Vol.  6,  p.  94,  Aug.,  1913. 

1145.  (Ohio.)  A  bank  received  for  col- 
lection a  draft  payable  "at  sight  on  arrival  of 
car,"  together  with  instructions  to  protest 
upon  non-payment.  The  draft  was  presented 
and  refused.  The  bank  wired  non-payment 
but  did  not  protest.  Opinion:  A  draft  pay- 
able "at  sight  on  arrival  of  car"  is  non-nego- 
tiable, and  is  not  properly  subject  to  protest. 
The  bank  exercised  due  diligence.  Vol.  4, 
p.  305,  Nov.,  1911. 

1146.  (Wis.)  A  check  payable  to  "John 
Smith  or  bearer"  was  stamped  across  its  face 
"non-negotiable  counter  check."  The  check 
was  presented  through  the  Clearing  House  by 
an  indorsee  of  the  payee  and  the  drawee  bank 
refused  payment.  Opinion:  The  bank's  re- 
fusal to  pay  was  justified  and  the  check  was 
not  properly  protestable.  Vol.  6,  p.  376, 
Nov.,  1913. 

Protest  not  abolished  in  any  state 

1147.  (Pa.)  The  protest  of  negotiable 
instruments  has  not  been  abolished  in  any 
state.     Vol.  5,  p.  170,  Sept.,  1912. 

Protest  permissible  but  not  compulsory 

1148.  (Del.)     Where  a  man  in  Delaware 

gave  his  check  drawn  on  a  bank  in  Delaware 
and  the  payee  deposits  the  item  in  a  bank  in 
New  York,  protest  for  non-payment  is  per- 
missible but  not  compulsory,  because  it  is  not 
a  foreign  bill  of  exchange.  Vol,  5,  p,  450, 
Jan.,  1913.     See  335,  336,  1113, 

1149.  (Va,)  In  the  case  of  promissory 
notes,  due  demand  and  notice  of  dishonor 
without  protest  are  all  that  is  necessary  to 
hold  the  indorser,  although  protest  is  of 
course  permissible.  Vol.  2,  p.  232,  Dec, 
1909. 

Persons  authorized  to  make  protest 

1150.  (La.)  A  statute  in  Louisiana  au- 
thorizes Justices  of  the  Peace  to  make  pro- 
tests of  negotiable  instruments  in  default  of 
notaries  and  parish  recorders,  provided  the 
protest  is  witnessed  by  two  persons  of  the 
same  parish.     Vol.  5,  p,  24,  July,  1912, 

1151.  (111.)  A  notary  who  is  an  em- 
ployee of  a  Federal  Reserve  Bank  protests 
paper  owned  by  the  bank  or  held  by  it  for  col- 


141 


1152 


DIO.EST  OF  LEGAL  OPINIONS 


lection  and  receives  the  fee  tlierefor.  Opin- 
ion: Siicli  ])r()test  is  not  prohibited  by  Section 
22  of  the  Federal  Reserve  Act.  A^ol.  7,  p. 
381,  Dec,  1914. 

Place  of  protest 

1152.  (La.)  A  drawee  hank  in  a  town 
returned  to  a  city  l)ank  a  clicck  nnpaid  he- 
cause  of  insulHcient  funds,  but  failed  to  have 
it  protested  because  there  was  no  notary  in 
the  place.  The  officer  of  the  drawee  bank 
went  to  the  city  bank  and  caused  the  check 
to  be  protested.  Opinion:  The  protest  was 
invalid  because  it  Avas  not  protested  at  the 
place  where  it  was  dishonored.  The  check 
could  have  been  protested  in  the  town  where 
payable  by  "any  respectable  resident  of  the 
place  in  the  presence  of  two  or  more  credible 
witnesses."     Vol.  4,  p.  156,  Sept.,  1911. 

1153.  (Tex.)  A  draft  was  drawn  on 
John  Smith,  and  erroneously  addressed  to 
Galveston,  Texas,  at  which  city  John  Smith 
was  not  located.  The  draft  was  protested  for 
non-payment.  Opinion:  The  protest  of  the 
draft  at  Galveston,  which  was  the  place  ad- 
dressed, was  proper  to  preserve  the  liability 
of  the  drawer  and  indorser.  Vol.  6,  p.  212, 
Sept.,  1913. 

Second  protest  of  check 

See  1114,  1121 

1154.  (Ark.)  A  check  which  had  been 
protested  for  insufficient  funds  was  presented 
for  payment  a  second  time  by  the  holder  w^hen 
the  funds  were  sufficient.  Opinion:  The 
safer  course  is  for  the  bank  to  refuse  payment 
in  absence  of  the  drawer's  express  instruc- 
tions and  to  suggest  that  the  holder  procure 
a  new  check.     Vol.  5,  p.  670,  April,  1913. 

1155.  (Ga.)  There  is  no  efficacy  in  pro- 
testing a  check  a  second  time  after  it  has 
once  been  protested  for  non-payment,  and  is 
again  presented  with  demand  for  payment 
which  is  refused.  Such  instrument  has  al- 
ready been  dishonored  and  the  liability  of  the 
parties  fixed  by  the  first  protest.  Vol.  9,  p. 
496,  Dec,  1916. 

1156.  (Ind.)  A  bank  received  for  pre- 
sentment a  protested  check  with  protest  fees 
added,  with  instructions  to  protest  if  not 
paid.  Opinion:  There  is  no  justification  for 
protesting  the  check  a  second  time.  Vol.  7, 
p.  1000,  June,  1915. 

Signature    on   instrument   lacking 

1157.  (111.)  By  agreement  between  a 
bank  and  its  depositor,  a  check  requires  two 


signatures  to  authorize  payment.  The'  bank 
refuses  to  pay  because  one  of  such  signatures 
is  missing  and  incpiires  as  to  the  legality  and 
)»r()priety  of  protesting  the  check.  Opinion: 
To  authorize  or  justify  a  protest  the  instru- 
7nent  must  be  "dishonored"  and  one  of  the 
essentials  to  constitute  dishonor  is  that  the 
instrument  must  be  "duly  presented."  In 
this  case  it  would  be  held  to  he  a  genuine  ne- 
gotiable instrument  duly  presented  and  pro- 
test would  be  justifiable  and  valid.  Vol.  9, 
p.  495,  Dec,  1916. 

Stopped  check 

1158.  (Md.)  Where  payment  of  a  check 
has  been  stopped  such  countermand  would 
not  excuse  presentment  and  notice  to  the  in- 
dorser or  protest  in  case  the  check  is  a  foreign 
bill  of  exchange.     Vol.  1,  p.  406,  May,  1909. 

1159.  (Va.)  A  bank  received  an  order 
from  its  customer  not  to  pay  his  check  of 
$143.40.  The  check  in  question  was  duly 
protested  at  the  request  of  the  bank  which 
mailed  it  for  payment.  The  depositor 
claims  that  the  check  should  not  have  been 
protested,  that  his  credit  has  been  injured 
and  refuses  to  pay  the  protest  fees.  Opin- 
ion: When  a  customer  orders  payment  of 
his  check  stopped,  it  is  the  duty  of  the  bank 
to  refuse  payment  and  it  may  properly  cause 
protest  to  he  made  at  the  request  of  the 
holder.     Vol.  11,  p.  485,  March,  1919. 

Time  of  protest 

See  660 

1160.  (Ark.)  A  bank  received  for  col- 
lection a  note,  payment  of  which  was  extended 
one  week.  The  makers  defaulted  in  payment 
and  the  bank  protested  the  note.  The  owner 
of  the  note  refused  to  pay  the  protest  fees, 
claiming  that  the  proper  time  of  protest  was 
the  date  of  original  maturity.  Opinion: 
Where  there  is  a  valid  extension  of  time  of 
payment  of  a  promissory  note,  the  date  of  ex- 
piration of  the  extension  and  not  the  date  of 
original  maturity  is  the  proper  time  of  pro- 
test.    Vol.  (!,  p.  96,  Aug.,  1913. 

1161.  (Ga.)  A  bank  check  can  be  pro- 
tested inmiediately  upon  presentment  and  re- 
fusal to  pay  and  it  is  not  necessary  for  the 
holder  to  wait  until  the  close  of  banking  hours 
before  handing  it  to  a  notary  for  protest. 
Vol.  7,  p.  384,  Dec,  1914. 

1162.  (La.)  A  check  dishonored  five 
minutes  after  the  opening  hour  of  a  bank 
may  be  protested  immediately  and  it  is  not 
necessary  to  wait  until  closing  time.  Vol.  2, 
p.  537,  June,  1910. 


142 


PROTEST 


1173 


1163.  (Miss.)  A  check  may  be  protested 
as  soon  as  dishonored.  Vol.  3,  p.  202,  Oct., 
1910. 

1164.  (N.  J.)  A  note  payable  at  the 
place  of  business  of  the  maker  was  presented 
for  payment  at  3  o'clock  on  the  day  it  fell 
due.  The  note  was  protested  for  non-pay- 
ment at  that  time,  although  the  place  of  bus- 
iness kept  open  until  6  o'clock.  It  is  claimed 
that  the  note  should  have  been  held  the  whole 
day  before  presenting  it.  Opinion:  The 
note  can  be  protested  for  non-payment  before 
the  closing  hour  of  the  day  of  maturity. 
Vol.  3,  p.  73G,  June,  1911. 

Note:  Tlie  above  is  supported  by  several  de- 
cisions; but  in  German-American  Bank  v.  Milli- 
man,  31  Misc.  (N.  Y.)  87,  it  was  held  that  a  note 
payable  at  a  bank,  presented  and  refu^<ed  payment 
during  banking  hours,  should  not  be  ])rotested 
until  tlie  close  of  banking  hours  because  the 
maker  had  the  whole  of  tlie  day  in  which  to  pay 
and  the  note  was  not  dishonored  until  tiie  end  of 
the  day. 

1165.  (N.  Y.)  A  check  given  in  pay- 
ment of  a  note  was  presented  on  the  following 
day  and  payment  was  refused  because  of  "in- 
sufficient funds."  The  holder  still  has  the  note 
in  his  possession  and  wishes  to  protest  the 
same.  Opinion:  Although  the  case  has  never 
been  decided,  probably  a  valid  protest  of  the 
note  a  day  after  its  maturity  could  be  made, 
because  the  note  would  not  be  regarded  as  dis- 
honored until  the  check  given  as  conditional 
payment  was  dishonored.  Vol.  5,  p.  829, 
June,  1913. 

1166.  (N.  Y.)  A  check  is  presented  and 
dishonored  on  Saturday  forenoon.  Opinion: 
Protest  should  be  made  on  Saturday,  and  the 
check  should  not  be  held  over  without  pro- 
test until  the  following  Monday.  Vol.  4,  p. 
685,  May,  1912. 

1167.  (N.  Dak.)  Protest  of  a  check 
must  be  made  on  dav  of  dishonor  unless  delay 
excused.     Vol.  3,  p."  202,  Oct.,  1910. 

1168.  (Ohio.)  Where  a  check  is  pre- 
sented and  refused  payment,  it  is  not  neces- 
sary for  the  notary  to  wait  until  the  close 
of  banking  hours,  but  protest  may  be  made 
immediately.  The  drawer,  however,  has  the 
right  to  tender  payment  to  holder  of  the 
amount  and  protest  fee  at  any  time  during 
the  day.  Although  the  point  has  not  been 
specifically  decided,  it  would  seem  that  a 
tender  to  the  notary,  the  same  day,  of  the 
amount  due  with  protest  fees,  while  he  still 
retains  possession  of  the  protested  instrument 
would  be  a  valid  tender,  and  that  upon  such 
tender  the  drawer  could  demand  a  surrender 
of  the  instrument.  Vol.  9,  p.  653,  Feb., 
1917. 


1169.  (Va.)  A  check  for  $100  was  pre- 
sented at  a  bank  at  ten  o'clock  in  the  morn- 
ing and  was  immediately  protested  for  non- 
payment because  of  no  funds.  Before  the 
close  of  banking  hours  on  the  same  day  the 
bank  received  funds  and  notified  the  holder 
that  it  would  pay  the  check  without  the  pro- 
test fees.  Opinion:  The  check  having  been 
lawfully  protested  at  ten  o'clock,  the  holder 
was  entitled  to  recover  the  fees  in  addition 
to  the  face  of  the  check.  In  the  absence  of 
instructions  from  the  maker,  the  better  course 
for  the  bank  is  to  leave  the  matter  for  direct 
adjustment  between  the  parties.  Vol.  6,  p. 
274,  Oct.,  1913. 

Waiver   of   protest 
See  10:j4  ct  *•<•(/ 

1170.  (Ala.)  A  note  contains  on  its  face 
above  the  signature  a  provision  that  "the 
makers  and  indorsers  waive  demand,  protest 
and  notice  of  protest."  Opinion:  The  pro- 
vision is  binding  on  all  the  indorsers  and  dis- 
penses with  the  necessity  of  those  steps  to 
preserve  their  liability.  Vol.  G,  p.  36,  July, 
1913. 

1171.  (Cal.)  The  clause  in  an  indorsed 
note  "this  note  subject  to  privilege  of  one  re- 
newal for  like  period"  is  an  implied  waiver 
of  demand  and  notice  of  protest  by  the  in- 
dorser  at  least  until  the  expiration  of  the  ex- 
tended period,  and  by  later  cases  also  waives 
those  steps  at  the  end  of  the  period  of  exten- 
sion. It  would  be  better  to  have  an  express 
waiver  of  protest  in  the  note  to  avoid  all 
question.     Vol.  9,  p.  240,  Sept.,  1916. 

1172.  (Kan.)  A  bank  has  in  its  files 
certain  notes  indorsed  by  its  customer  "pay- 
ment guaranteed,  ]irotest  waived.''  In  case 
of  default  in  payment,  the  bank  seeks  to  know 
whether  it  must  exhaust  the  security  of  the 
maker  before  recovering  from  the  indorser. 
Opinion:  Where  the  payee  of  a  note  transfers 
it  l)y  indorsing  "payment  giiaranteod,  protest 
waived"  this,  according  to  the  weight  of  au- 
thority, is  an  indorsement  in  the  commercial 
sense,  under  which  an  innocent  purchaser  for 
value  before  maturity  becomes  a  holder  in  due 
course  with  right  to  enforce  against  the  maker 
free  from  defense  and  with  immediate  re- 
course upon  the  indorser  upon  dishonor  at 
maturity.     Vol.  10,  p.  594,  Feb.,  1918. 

1173.  (Minn.)  The  Negotiable  Instru- 
ments Act  provides  that  a  waiver  of  protest 
is  a  waiver  of  presentment  and  notice  of  dis- 
honor as  well  as  of  formal  protest.  Where 
a  note  contains  a  clause  "the  drawer  and  in- 
dorsers severally  waive  protest  and  notice  of 
protest,"  such  waiver  embodied  in  the  instru- 


14.3 


117H 


DIGEST  OF  LEGAL  OPINIONS 


ment  itself  is  binding  on  the  indorscrs.  An 
accommodation  maker  of  a  note  is  not  entitled 
to  notice  of  dishonor,  but  an  accommodation 
indorsor,  in  tlio  absence  of  a  waiver,  is  so  en- 
titled.    Vol.  G,  p.  575,  Feb.,  15)14. 

1174.  (Miss.)  A  bank  received  for  col- 
lection a  note  containin^]^  the  followinpj  waiver 
printed  on  its  face:  "The  drawers  and  in- 
dorscrs severally  waive  presentment  for  pay- 
ment, protest  and  notice  of  protest  and  non- 
payment of  this  note."  No  instructions  were 
given  as  to  protest.  Opinion:  The  proper 
course  for  the  collecting  bank  was  to  omit 
protest.     A^ol.  5,  p.  378,  Dec,  1912. 

1175.  (Pa.)  The  payee  of  a  note  in- 
dorses it  as  follows:  "We  hereby  waive  de- 
mand, protest  and  notice  of  non-payment  of 
the  within  note.  John  Doe  Co.,  John  Doe, 
President,  William  Doe,  Secretary."  The 
holder  is  not  certain  whether  the  above  con- 


stitutes both  a  waiver  of  protest  and  an  in- 
dorsement, or  is  a  waiver  of  protest  only. 
Opinion:  Where  the  payee  of  a  note  indorses 
the  same  by  signing  his  name  under  a  waiver 
of  prot(!st,  such  indorsement  operates  both  as 
a  waiver  of  protest  and  as  an  indorsement 
transferring  title.  Vol.  10,  p.  311,  Oct., 
1017. 

1176.  (W.  Va.)  The  following  waiver 
of  protest,  "For  value  received here- 
by guarantee  the  payment  of  the  within  note 
and  any  renewal  of  the  same,  and  hereby 
waive  protest,  demand  and  notice  of  non- 
payment thereof,"  was  rubber  stamped  on  the 
back  of  an  old  note  and  attached  to  a  renewal 
note  containing  no  such  waiver.  Opinion: 
The  waiver  on  the  original  note  also  consti- 
tuted a  waiver  by  the  indorser  of  demand, 
protest  and  notice  of  the  renewal.  Vol.  8, 
p.  70G,  Feb.,  1916. 


SET  OFF 


Collection  proceeds  set  off  against 
bankrupt 

1177.  (Ga.)  A  bank  received  from  its 
customer  notes  deposited  for  collection  at 
a  time  when  bankruptcy  was  not  contemplated 
by  the  customer.  After  the  customer  went 
into  bankruptcy,  the  notes  were  collected  and 
the  bank  applied  the  proceeds  of  the  notes 
upon  a  claim  it  held  against  the  customer. 
Opinion:  The  bank  had  a  right  to  set  off  the 
proceeds  of  the  notes  deposited  for  collection 
at  a  time  when  bankruptcy  was  not  contem- 
plated and  collected  after  the  bankruptcy. 
Vol.  7,  p.  494,  Jan.,  1915. 

Consent  of  depositor  required  in 
Louisiana 

1178.  (La.)  John  Doe  deposited  funds 
in  his  bank  on  the  same  day  upon  which  his 
note  held  by  it  became  due.  He  had  been 
carrying  the  note  from  year  to  year  for  four 
years,  having  it  renewed  each  year.  The 
bank  without  Doe's  consent  charged  the  note 
to  his  account,  and  refused  to  honor  his 
checks,  whereupon  Doe  brings  suit.  Opin- 
ion: Under  the  rule  generally  prevailing  a 
bank  has  a  right  to  set  off  a  matured  debt 
against  a  customer's  account  without  his  con- 
sent, but  in  Louisiana  a  special  rule  prevails 
that  the  bank  is  not  authorized  to  apply  a  cus- 
tomers deposit  to  payment  of  his  debts,  ex- 
cept there  is  a  special  mandate  from  the  de- 
positor or  agreement  or  course  of  dealing  so 
authorizing.     Vol.  11,  p.  276,  Nov.,  1918. 


Consent  of  depositor  unnecessary 

1179.  (Del.)  A  bank  owned  its  custom- 
er's note  of  $100  due  at  the  bank  August  5th. 
On  that  date  the  customer  had  $100  to  his 
credit  at  the  bank.  Opinion:  The  bank  had 
the  right  at  the  maturity  of  the  note  to  charge 
it  up  to  his  account  without  first  notifying 
him  or  obtaining  his  consent.  Vol.  2,  p.  73, 
Aug.,  1909. 

1180.  (Miss.)  A  bank  held  collateral 
security  for  two  items  of  indebtedness  of  one 
of  its  depositors  who  had  an  account  with 
the  bank.  The  bank  applied  the  deposit  to 
one  of  the  debts  before  it  had  matured,  re- 
ducing the  balance  to  $90.  A  check  for  $100 
was  presented  after  the  debts  had  become  due 
and  was  refused.  Opinion:  The  bank  had  a 
right  at  any  time  to  offset  any  matured  in- 
debtedness owing  by  the  depositor  against  his 
credit  without  prior  resort  to  any  collateral 
security  held  by  it  and  without  first  obtaining 
the  consent  of  the  depositor.  (A  few  states, 
not  Mississippi,)  require  prior  exhaustion  of 
collateral.  At  the  time  the  check  for  $100  was 
presented,  the  bank  owed  the  depositor  $90 
and  was  justified  in  refusing  pavment.  Vol. 
8,  p.  1101,  June,  1916.    See  1183  et  seq. 

1181.  (N.  J.)  Bank  A  discounted  and 
became  owner  of  a  note  drawn  by  its  customer 
Smith  in  favor  of  Jones,  made  payable  to 
Bank  B,  where  Smith  also  keeps  an  account. 
The  note  was  protested  at  maturity.  Opin- 
ion: Bank  A  has  the  right  to  charge  up  the 
note  against  Smith's  account  without  special 


144 


SET  OFF 


1188 


instructions  from  Smith,  although  he  should 
be  notified  that  the  note  has  been  so  charged 
up.     Vol.  3,  p.  736,  June,  1911. 

County  warrant  set  off  against  deposit 
of  county 

1182.  (Ga.)  A  bank  in  Georgia  pur- 
chased certain  county  orders  or  scripts,  being 
the  matured  obligations  of  the  county,  drawn 
against  the  county  treasurer  by  the  board  of 
county  commissioners.  It  was  the  practice 
of  the  bank  to  cash  these  orders  and  hold  them 
until  the  end  of  the  month,  when  the  treas- 
urer would  give  his  check  on  the  account  to 
take  them  up.  Upon  going  out  of  office,  at 
the  time  the  office  of  treasurer  was  abolished, 
he  refused  to  give  his  check  taking  up  the 
orders  that  had  accumulated,  but  instead  gave 
a  check  for  the  entire  balance  to  be  used  in 
the  new  county  depository.  The  bank  seeks 
to  charge  the  said  scripts  to  the  treasurer's 
account,  before  his  balance  check  is  presented. 
Opinion:  Where  a  bank  purchased  county 
orders  upon  the  county  treasurer  under  an 
arrangement  by  which,  at  the  end  of  the 
month,  the  treasurer  would  pay  such  orders 
by  his  check  upon  the  county  deposit  held  by 
the  bank,  the  latter,  upon  the  treasurer's  fail- 
ure so  to  do,  would  probably  be  held  to  have 
a  right  to  set  off  the  county  orders,  as  a  ma- 
tured indebtedness  owing  it  by  the  county 
against  the  deposit.  Vol.  10,  p.  203,  Sept., 
1917. 

Debt  protected  by  collateral 

See  1180 

1183.  (Cal.)  A  bank  in  California 
owned  a  past  due  note  for  $500,  drawn  by  its 
depositor  who  had  a  balance  of  $1,000  with 
the  bank.  At  maturity  of  the  note  the  maker 
had  refused  to  pay.  Opinion:  Under  the  law 
in  California  the  bank  has  a  right  to  apply 
the  maker's  deposit  upon  his  unpaid  note  at 
maturity  unless  it  holds  security  for  the  in- 
debtedness. This  right  also  extends  to  a 
note  of  the  depositor  purchased  by  the  bank 
from  an  indorser.  Where  a  note  has  been 
discounted  for  an  indorser's  benefit,  his  de- 
posit may  be  api)lied  in  payment  at  the  bank's 
option.   'Vol.  8,  p.  910,  April,  1916. 

1184.  (Cal.)  A  bank  holds  a  past  due 
note  of  its  customer  in  favor  of  the  l)aiik. 
The  customer's  account  is  sufficiently  large 
to  meet  the  indebtedness.  Opinion:  The 
bank  has  the  right  to  apply  the  deposit  to 
payment  of  the  depositor's  matured  indebted- 
ness, but  in  California,  if  the  note  is  secured 


by  a  mortgage  of  real  or  personal  property, 
the  bank  cannot  apply  the  deposit  until  the 
security  is  exhausted.  Vol.  6,  p.  434,  Dec, 
1913. 

1185,  (N.  C.)  The  rule  is  well  settled 
that  a  bank  may  look  to  deposits  in  its  hands 
for  the  repayment  of  any  indebtedness  to  it 
on  the  part  of  the  depositor  and  may  apply 
his  deposits  on  his  debts  to  the  bank  as  they 
become  due.  A  bank  holding  a  matured  note 
of  its  depositor  has  the  right  to  apply  his  de- 
posit to  payment  of  the  note.  In  some  juris- 
dictions, to  wit,  California,  Kentucky  and 
Massachusetts,  it  has  been  held  that  a  bank 
is  not  entitled  to  apply  a  deposit  to  a  debt  of 
a  depositor  which  is  fully  protected  bv  other 
collateral.     Vol.  10,  p.  783,  May,  1918. 

Debt  must  be  contracted  in  good  faith 

1186,  (Pa.)  A  bank  held  a  deposit  to 
the  credit  of  A.  One  B,  who  ov.ned  an  un- 
matured note  executed  by  A,  asked  the  bank 
to  discount  the  note  on  his  personal  guaran- 
tee, and  to  use  A's  deposit  as  a  set  off  at  ma- 
turity. Opinion:  Ordinarily  the  bank  would 
have  the  right  to  set  off  A's  note  indorsed  by 
B  against  A's  deposit,  but  there  is  a  possibil- 
ity that  a  court  would  deny  the  right  of  set  off 
on  the  ground  that  the  note  was  acquired  by 
the  bank  to  enable  B  to  gain  an  unfair  advan- 
tage over  A,  and  that  the  indebtedness  of  A 
to  the  bank  was  not  a  bona  fide  debt  subject 
to  set  off.     Vol.  5,  p,  376,  Dec,  191-?. 

Set  off  against  debt  of  presenting  check- 
holder 

1187.  (in.)  The  payee  of  a  check  who 
presents  it  to  a  bank  owes  the  bank  on  a  past 
due  note,  the  amount  being  less  than  the 
amount  of  the  check.  The  bank  in  cashing 
the  check  desires  to  deduct  the  amount  of  the 
indebtedness  and  deliver  him  the  balance. 
Opinion:  Drawee  bank  upon  presentment  of 
a  clieck  by  the  payee  indebted  to  it  cannot  de- 
duct tlic  amount  of  indebtedness  from  the 
amount  of  the  check,  paying  only  the  balance 
to  the  liolder.  In  so  doing  it  would  lie  violating 
its  contract  with  the  drawer,  namely,  to  pay 
his  checks  according  to  his  order  and  direc- 
tion.    Vol.  10,  p.  310,  Oct.,  1917. 

Set  off  of  demand  note 

1188.  (Iowa.)  A  bank  held  a  demand 
note  of  its  depositor,  who  had  on  deposit  a 
balance  smaller  than  the  amount  of  the  note. 
Tlie  bank  applied  the  deposit  in  partial  pay- 
ment of  tiie  note,  and  two  months  later  the 
depositor  was  threatened  with  bankruptcy. 


145 


1181) 


DKiKST  OF  LECiAL  UPiXlOXS 


Opinion:  Tlio  application  of  the  customer'a 
(Icponit  to  Ilia  (leiiiand  note  two  niontlis  before 
it  htTiune  likely  that  the  depositor  would  he 
forced  into  bankruptcy  was  a  valid  set  off. 
The  bank  can  retain  such  balance  and  prove 
its  claim  for  the  amount  remaininj;^  due 
against  the  estate  and  recover  its  pro  rata 
share.     Vol  5,  p.  107,  Aug.,  1912. 

1189.  (Mich.)  A  ))ank  has  the  right  to 
apply  the  funds  to  the  general  credit  of  a  cus- 
tomer toward  payment  of  his  demand  note, 
held  by  the  bank,  although  no  demand  for 
payment  has  been  made.  Where  the  demand 
note  is  "secured  by  sundry  notes  deposited  as 
collateral''  the  bank  can  set  off  the  demand 
note  against  the  general  deposit,  and  is  not 
compelled  to  first  resort  to  such  collateral. 
Vol.  11,  p.  39,  July,  1918. 

1190.  (Ohio.)  A  had  $2,000  on  de- 
posit with  his  bank,  which  owned  his  demand 
note  of  $1,000.  The  bank  applied  the  deposit 
in  payment  of  the  note  and  two  days  after- 
wards A  failed.  Opinion:  The  bank  had  the 
right  to  apply  the  bankrupt's  deposit  upon  his 
demand  note.  Money  deposited  in  a  bank  in 
the  due  course  of  business  by  an  insolvent 
within  four  months  of  the  time  he  is  adjudged 
a  bankrupt,  is  not  a  transfer  of  property 
amounting  to  a  preference  within  the  meaning 
of  the  Bankruptcy  Act  of  1898.  Vol.  3,  p. 
146,  Sept.,  1910. 

Deposits  impressed  with  trust  character 

1191.  (111.)  A  note  for  $2,700  secured 
by  a  chattel  mortgage  on  cattle  was  given  by 
A  to  B,  who  sold  it  to  Bank  C.  A  Avrougfully 
sold  the  mortgaged  cattle  and  deposited  the 
proceeds  with  Bank  D,  part  of  which  were 
attached  by  one  of  A*s  creditors  and  the  bal- 
ance was  applied  by  the  bank  upon  an  in- 
debtedness of  A.  B,  knowing  that  the  cattle 
had  been  disposed  of,  re-purchased  the  note 
and  the  mortgage  from  Bank  C  and  brought 
suit  against  Bank  D  to  recover  the  proceeds 
as  a  trust  fund.  Opinion:  According  to  the 
weight  of  authority  (a  few  cases  contra)  Bank 
D  was  entitled  to  apply  the  deposit  upon  the 
indebtedness  of  A,  and  not  obliged  to  account 
for  it  as  a  trust  fund  if  it  had  no  knowledge 
of  its  trust  character.  The  bank,  however, 
has  no  such  right  of  set  off  where  it  knows 
that  a  general  deposit  is  impressed  with  a 
trust  character.     Vol.  8,  p.  36,  July,  1915. 

Deposits  made  in  view  of  insolvency 

1192.  (Mass.)  The  deposit  balance  of  a 
customer  who  has  gone  into  bankruptcy  may 


be  set  off  against  his  indebtedness  to  the  bank 
whether  due  or  not,  provided  his  deposits  have 
licen  received  in  usual  course  subject  to  check 
and  not  in  view  of  his  insolvency  with  an  in- 
tention to  make  a  preferential  a})propriation 
in  reduction  of  his  indebtedness.  Vol.  6,  p. 
575,  Feb.,  1914. 

1193.  (S.  Dak.)  A  bank  held  certain 
over-due  iiotes  of  a  lumber  company.  The 
company  made  several  deposits  subject  to 
check  which  the  bank  applied  to  payment  of 
the  notes.  The  company  then  became  bank- 
rupt. The  bank  had  been  employed  by  the 
company  as  sales  agent  on  salary.  Opinion: 
The  deposits  if  made  in  the  usual  course,  sub- 
ject to  check  within  four  months  of  bank 
ru])tcy,  may  be  set  off  against  the  bankrupt's 
notes,  whether  due  or  not,  but  it  is  otherwise 
if  the  bank  deposits  were  made  by  the  com- 
pany in  view  of  insolvency  with  an  intent  to 
give  a  preference.  The  Bankrupt  Act  pro- 
vides that  wages  to  salesmen  are  preferred 
payments,  but  it  is  very  doubtful  that  the  act 
would  be  construed  to  include  the  salary  to 
an  incorporated  state  bank  which  acted  as  a 
sales  agent.     Vol.  6,  p.  683,  April,  1914. 

Deposit  received  after  maturity  of  note 

1194.  (S.  Dak.)  A  bank  purchased 
from  the  indorser  a  note  which  was  not  paid 
at  maturity  by  the  maker,  who  claimed  fail- 
ure of  consideration.  After  maturity  the 
bank  received  funds  deposited  to  the  general 
account  of  the  maker,  against  which  funds  it 
set  off  the  note.  The  bank  had  previously 
started  suit  against  the  maker  but  discon- 
tinued it  after  it  had  set  off  the  note.  Opin- 
ion: The  bank  had  a  right  to  apply  to  the 
payment  of  the  note  not  only  all  the  funds 
deposited  in  the  bank  when  the  note  matured, 
but  all  funds  afterwards  received.  Such 
right  is  not  affected  by  the  fact  that  the  bank 
began  and  discontinued  suit.  Vol.  8,  p.  142, 
Aug.,  1915. 

Set  off  against  city  deposit 

1195.  (Ind.)  A  city  in  Indiana  was  in- 
del)ted  on  an  over-due  note  to  a  national  bank 
holding  the  city's  funds,  which  were  sufficient 
to  meet  the  note.  The  bank  accordingly  ap- 
plied the  deposit  to  payment  of  the  note  and 
accrued  interest.  Opinion  :  In  the  absence  of 
a  statute  to  the  contrary  (no  apparent  resttic- 
tion  in  Indiana)  the  bank  had  the  right  to 
apply  such  deposit  to  payment  of  the  city's 
indebtedness,  the  same  as  in  case  of  an  in- 
dividual depositor.     Vol.  7,  p.  97,  Aug.,  1914. 


146 


SET  OFF 


1204 


Set  off  of  claim  for  interest 

1196.  (Mo.)  A  bank,  reeeiviiiir  a  note 
for  collection,  collected  from  the  maker  and 
after  payment  to  the  holder  and  surrender  of 
the  note  discovered  that  through  error  the 
maker  still  owed  $4.04  interest.  The  bank 
paid  this  amount  to  the  payee,  the  maker 
acknowledging  his  indebtedness.  Later  the 
maker  of  the  note  became  a  depositor  for 
$200  and  against  this  account  the  bank 
charged  the  $4.64  for  which  the  depositor 
brings  suit.  Opinion :  In  the  discharge  of 
the  liability  for  $4.64,  the  bank  l)ecame  sub- 
rogated to  the  rights  and  remedies  of  the 
holder  of  the  note  and  there  arose  a  legally 
subsisting  cause  of  action  in  its  favor  against 
the  maker  of  the  note.  The  bank  had  the 
right  to  set  off  his  matured  indebtedness 
against  the  deposit.  Vol.  9,  p.  748,  March, 
1917. 

Set  off  against  indebtedness  of  decedent 

1197.  (Mo.)  The  administrator  of  an 
estate  draws  a  check  against  the  account  of 
the  deceased,  which  the  bank  refuses  to  pay, 
claiming  that  it  is  entitled  to  set  off  against 
the  account  a  debt  due  at  the  time  of  deposi- 
tor's death.  Opinion:  The  bank  has  a  right 
to  set  off  against  the  account  of  the  depositor 
a  matured  debt  owing  by  him  at  the  time  of 
his  death,  and  to  refuse  to  pay  the  check  of 
the  administrator  upon  the  deposit  so  set  off. 
Vol.  9,  p.  909,  May,  1917. 

1198.  (Mont.)  A  bank  held  two  past 
due  unsecured  notes  of  a  customer  who  carried 
a  balance  with  the  bank  subject  to  check.  The 
customer  died.  Opinion:  Upon  the  death  of 
the  depositor,  the  bank  had  the  right  to  set 
off  the  past  due  notes  against  his  account. 
The  decisions  conflict  as  to  the  right  of  set  oft' 
where  the  notes  have  not  matured.  In  IMon- 
tana  such  right  is  denied.  Vol.  6,  p.  637, 
March,  1914.' 

1199.  (N.  C.)  The  maker  of  a  note 
died,  leaving  a  balance  to  his  cnecking  ac- 
count. The  bank  seeks  to  know  whether  it 
has  the  right  of  set  off  before  returning  the 
balance  to  the  administrator.  Opinion:  A 
bank  owning  the  note  of  a  customer  who  has 
deceased  has  the  right,  if  the  note  has  ma- 
tured, to  apply  the  maker's  deposit  upon  the 
note  and  in  North  Carolina  if  the  estate  is 
insolvent,  may  apply  such  deposit,  even 
though  the  note  is  not  due.  If  tlie  deposit  is 
not  sufficient  to  meet  the  note  the  balance 
would  be  a  debt  payal)le  by  the  administrator. 
The   administrator   in   declaring  a   dividend 


would  only  be  required  to  base  same  upon 
the  balance  due  after  the  deposit  was  set  off. 
Vol.  11,  p.  493,  March,  1919. 

1200.  (Pa.)  A  bank  loans  $100  receiv- 
ing therefor  a  judgment  note  for  that  amount. 
The  maker  of  the  note  subsequently  deposits 
$600  in  a  savings  account  and  several  days 
later  dies,  the  note  having  one  month  to  run. 
The  bank  seeks  to  set  off  the  unmatured  in- 
debtedness against  the  account.  Opinion: 
Bank  in  Pennsylvania  has  the  right  to  set  off 
unmatured  note  against  savings  account  of 
solvent  decedent  if  note  matures  prior  to  com- 
mencement of  suit  for  deposit ;  but  set  off 
not  allowed  if  estate  of  decedent  insolvent. 
Vol.  9,  p.  747,  March,  1917. 

1201.  (Pa.)  A  customer  was  indel)ted  to 
a  bank  on  a  note  which  became  due  several 
days  after  he  died.  The  bank  held  sufficient 
funds  of  the  decedent  to  apply  on  the  note. 
Opinion:  In  Pennsylvania,  the  bank  may 
charge  the  note  to  the  account  of  the  maker, 
though  the  note  does  not  become  due  for  sev- 
eral days  after  his  decease,  provided  his  estate 
is  solvent,  i)ut  such  right  of  set  off  does  not 
exist  if  the  estate  is  insolvent.  Vol.  6,  p. 
508,  Jan.,  1914. 

1202.  (Wyo.)  When  a  depositor  dies, 
indebted  to  the  bank,  the  latter  has  the  right 
to  apply  the  balance  t-o  his  credit  at  the  time 
of  his  death  upon  a  matured  indebtedness  of 
the  depositor,  and  is  not  accountable  to  the 
administrator  therefor,  except  for  the  excess 
when  the  balance  exceeds  the  indebtedness. 
Vol.  5,  p.  310,  Nov.,  1912. 

Set  off  against  indorser's  account 
See   (iS4.    121-2 

1203.  (N.  Y.)  A  bank  discounted  for 
the  indorser,  who  was  its  customer,  a  demand 
note.  Tlie  indorser  guaranteed  the  payment 
thereof.  The  note  was  dishonored  by  tlie 
maker.  Opinion:  The  bank  had  tlie  right  to 
charge  up  the  note  when  dishonored  against 
the  indorser's  account,  assuming  his  liability 
as  indorser  has  been  dulv  preserved.  Vol.  5. 
p.  667,  April,  1913.         " 

1204.  (S.  C.)  A  depositor  was  indebted 
to  a  bank  in  South  Carolina  as  an  indorser  on 
a  note  discounted  for  him.  The  bank  set  off 
the  note  against  the  depositor's  account. 
Opinion :  The  bank  had  the  right  of  set  off, 
but  under  the  law  of  South  Carolina  must 
give  the  depositor  notice  of  application  of  the 
deposit,  and  checks  drawn  before  such  notice 
must  be  paid.  Where  the  note  is  discounted 
for  tlie  maker  and  the  depositor  is  an  accom- 


147 


1205 


DIGEST  OP  LEGAL  OPINIONS 


modation  indorser,  it  is  doubtful  if  the 
lat tor's  deposit  can  be  set  ofi".  Vol.  8,  p.  37, 
July,  1915. 

1205.  (Tenn.)  A  bank  cashed  for  its 
depositor  a  cheek  indorsed  l)y  him,  payment 
of  which  was  refused  l)y  the  drawee  bank. 
The  depositor's  liability  as  indorser  was  fixed 
by  due  demand  and  notice  of  disnonor.  The 
bank  wishes  to  set  off  his  deposit  against  his 
indebtedness  as  indorser.  Opinion:  There 
existed  a  mutual  debt  between  the  bank  and 
its  depositor,  which  would  entitle  the  bank  to 
apply  the  indorser's  deposit  against  his  in- 
debtedness as  indorser.  The  bank  would  not 
be  compelled  to  first  sue  and  obtain  judgment 
against  the  indorser  who  did  not  consent  to 
such  application.     Vol.  5,  p.  309,  Nov.,  1912. 

Depositor's   right  to   set  off  against 

insolvent  bank 

See   1214,   1215,   1216 

1206.  (Ark.)  A  depositor  has  (1)  a 
right  to  set  off  his  deposit  in  an  insolvent 
national  bank  against  his  liability  on  a  note 
held  by  the  bank,  but  (2)  no  right  to  set  off 
his  deposit  against  his  double  liability  as  a 
stockholder.     Vol.  9,  p.  241,  Sept.,  1916. 

1207.  (Ark.)  Depositor  in  insolvent 
bank  has  right  to  set  off  his  deposit  against 
his  indebtedness  to  the  bank,  whether  due  or 
not.     Vol.  6,  p.  98,  Aug.,  1913. 

1208.  (Mass.)  A  bank  held  a  note  for 
$5,000  of  its  depositor  who  had  on  deposit 
$5,000.  The  bank  failed  before  the  note  ma- 
tured. Opinion:  The  depositor  has  the  right 
to  set  off  the  deposit  standing  to  his  credit 
at  time  of  insolvency  against  his  liability  on 
the  note.     Vol.  5,  p.  445,  Jan.,  1913. 

1209.  (Pa.)  A  is  a  depositor  in  a  bank 
which  failed.  A  owed  $500  on  a  note  to  the 
bank  and  carried  a  balance  of  $500.  B  and 
others  are  depositors  but  not  indebted  to  the 
bank.  B  asks  if  it  is  not  discriminating 
against  him  in  favor  of  A  to  allow  A  to  set 
off  his  indebtedness.  Opinion:  A  has  a  right 
to  set  off  his  balance  against  his  indebtedness 
to  the  bank,  whether  due  or  not.  The  exer- 
cise of  such  right  is  not  discriminating 
against  B  or  the  other  depositors.  Vol.  6, 
p.  98,  Aug.,  1913. 

Maker's  account  charged  in  interest  of 
indorsers 

1210.  (N.  C.)  "Where  a  bank  owns  an 
indorsed  note,  and  at  maturity  has  sufficient 


funds  of  the  maker  on  deposit  to  pay  it,  the 
decisions  conflict  as  to  wliether  failure  to 
charge  the  note  to  the  maker's  account  will 
release  the  indorser.  If,  however,  note  by  its 
terms  is  payable  at  bank,  under  Negotiable 
Instruments  Law,  being  an  order  to  the  bank 
to  pay,  indorser  would  be  released  by  failure 
to  charge  up.  But  bank  is  under  no  obliga- 
tion, in  interest  of  indorser,  to  apply  maker's 
deposit  to  note  owned  by  it  where  funds 
insufhcient  at  maturity,  nor  (according  to 
majority  of  courts,  a  few  contra)  to  apply 
sufficient  subsequent  deposits.  Vol.  3,  p.  5^3, 
March,  1911. 

1211.  (Ohio.)  At  maturity  of  a  note 
made  by  a  corporation  and  bearing  several 
indorsements,  the  maker  had  on  deposit  with 
the  bank  o^vning  the  note  a  sum  less  than  the 
amount  of  the  note.  After  maturity  the  cor- 
poration drew  out  its  balance  and  failed,  leav- 
ing the  note  unpaid.  Opinion:  A  majority 
of  the  courts  hold  that  the  bank  is  not  obliged 
to  apply  the  maker's  deposit  towards  a  par- 
tial satisfaction  of  the  note  in  the  interest  of 
the  indorsers  and  sureties.  The  bank's  omis- 
sion to  apply  the  partial  deposit  will  not  re- 
lease the  indorsers,  although  the  maker  sub- 
sequently draws  out  the  balance  and  then 
fails.     Vol.  6,  p.  818,  June,  1914. 

1212.  CPa.)  A  bank  owned  an  over-due 
note.  The  maker  and  indorser  both  carried 
accounts  with  the  bank.  The  maker's  de- 
posit was  not  sufficient  to  meet  the  note  at 
maturity.  Opinion:  The  bank  has  a  right 
to  set  off  against  the  indorser's  account ;  but 
where  the  maker's  account  is  sufficient  at  ma- 
turity, the  bank  is  bound  to  apply  the  maker's 
deposit  in  relief  of  the  indorser,  and  failure 
so  to  do  will  discharge  the  indorser:  if  in- 
sufficient at  that  time,  subsequent  deposits 
will  not  raise  that  dutv.  Vol.  8,  p.  909. 
April,  1916. 

1213.  (Pa.)  A  note  of  A  was  discounted 
for  B,  the  indorser,  by  a  bank  in  which  both 
A  and  B  were  depositors.  The  note  was  not 
paid  at  maturity  and  the  bank  charged  the 
note  to  A's  account  without  first  presenting 
it  at  A's  place  of  business,  where  it  was 
payable.  Opinion:  The  bank  probably  had 
the  right  of  set  off  by  charging  the  note  to 
A's  account,  without  first  presenting  it  to 
him  for  pa^Tncnt  at  his  place  of  business. 
The  same  conclusion  would  apply  where  -the 
note  was  discounted  for  A  instead  of  for  B. 
In  a  case  where  such  a  note  was  presented 
at  A's  place  of  business  and  protested,  a 
similar  right  of  set  off  would  exist  against 
A's   account,   but  not  against   B's   account, 


14S 


SET  OFF 


1220 


where  A's  account  was  sufiBeient.    Yol.  4,  p. 
685,  May,  1912. 

Note  set   off  against  insolvent  bank  by 
indorser 

1214.  (Ky.)  A  bank  has  a  deposit  of 
$5,000  subject  to  check  in  B  Bank,  and 
owes  B  Bank  a  note  of  $10,000.  B  Bank 
fails.  A  Bank  desires  to  pay  B  Bank  $5,000 
and  set  off  the  other  $5,000.  Opinion:  It 
is  generally  held  by  the  courts  that  when  a 
bank  becomes  insolvent,  and  holds  the  note 
of  a  depositor  who  is  the  maker,  whether 
due  or  not  due,  and  also  has  a  balance  to 
the  credit  of  the  depositor,  the  latter  has 
the  right  to  set  off  the  deposit  against  the 
note.  But  where  the  depositor  is  indorser 
on  note  of  a  solvent  maker  some  cases  hold 
that  the  right  of  set  off  does  not  exist.  Yol. 
7,  p.  494,  Jan.,  1915. 

1215.  (N.  J.)  A  bank  holds  a  matured 
note  of  a  depositor  for  an  amount  larger  than 
his  account  in  said  bank.  The  bank  becomes 
insolvent.  Opinion:  The  depositor  may 
have  his  deposit  set  off  against  his  note, 
whether  matiired  or  unmatured  at  the  time 
of  the  bank's  insolvency,  whether  state  or 
national.  This  right  of  set  off  could  be  exer- 
cised by  the  depositor  tendering  to  the 
receiver  of  the  bank  the  difference  between 
the  amount  of  his  balance  and  the  amount 
due  upon  his  note.  But  it  is  questionable 
whether  a  depositor  who  has  indorsed  such 
a  note  can  have  it  set  off  against  his  deposit 
in  the  insolvent  bank  unless  the  maker  is 
insolvent.  Where,  however,  the  depositor 
discounted  his  wife's  note  Avith  his  indorse- 
ment, and  is  the  accommodated  party  and 
the  real  debtor,  he  is  entitled  to  a  set  off  on 
equitable  ground.    Yol.  G,  p.  508,  Jan.,  1914. 

1216.  (Wash.)  A  depositor  in  an  in- 
solvent bank,  who  is  indebted  to  the  bank  as 
maker  upon  a  note,  has  a  right  to  set  off"  his 
deposit  against  such  indebtedness,  whether 
the  note  is  due  or  not  yet  matured.  Where 
the  depositor  is  an  indorser,  some  courts  hold 
the  same  right  of  set  off  exists,  but  others 
that  the  indorser  cannot  set  off  his  deposit 
unless  the  maker  is  insolvent.  Yol.  7,  p. 
387,  Dec,  1914. 

Partnership  debt  set  off  against  individual 
account 

1217.  (Cal.)  A  and  B,  co-partners,  gave 
to  a  bank  their  note  of  $300,  due  one  day 
after  date,  and  later  assigned  their  business 


to  C  for  the  benefit  of  creditors.  C  ran  the 
business  as  assignee  and  kept  his  account  with 
tbe  bank.  The  not€  not  having  been  paid, 
tiic  Ijank  wants  to  charge  it  to  the  assignee's 
account.  Opinion:  The  bank  has  the  right 
to  set  off  the  partnership  note  against  the 
deposit  existing  at  the  time  of  the  assignment, 
but  cannot  exercise  such  right  against  the 
deposits  of  the  assicmee.  Yol.  9,  p.  351,  Oct., 
191G. 

1218.  (N.  C.)  The  firm  of  Doe  and 
Eoe  owes  a  bank  $165  upon  its  note.  Doe 
has  sold  out  his  interest  to  Smith,  and  has 
deposited  the  purchase  money  in  the  bank  to 
his  individual  credit.  Later,  as  a  result  of 
a  dispute,  Doe  agrees  to  refund  part  of  the 
purchase  money  to  Smith,  and  has  given 
Smith  an  order  on  the  bank  for  $1,000.  The 
bank  has  paid  Smith  all  but  $1G5  thereof, 
claiming  the  right  to  set  off  the  firm's  note. 
Opinion:  Under  the  law  of  North  Carolina 
the  bank  cannot  set  off  the  firm's  note  against 
the  partner's  individual  account.  But  in  an 
action  by  Doe,  the  partner,  or  by  Smith,  the 
assignee,  for  the  deposit,  the  bank  can  plead 
the  firm's  indebtedness  by  way  of  counter- 
claim, or  can  recover  the  same  in  an  inde- 
pendent action  against  the  partner.  Vol.  6, 
p.  97,  Aug.,  1913. 

1219.  (Tenn.)  It  is  the  general  rule 
that  a  bank  has  a  right  to  set  off  a  debt  from 
the  depositor  against  his  deposit,  but  the 
mutual  debts  thus  set  off  must  be  in  the 
same  right;  for  example,  it  is  generally  held 
that  a  bank  cannot  apply  a  deposit  of  an 
individual  to  debt  of  a  firm  of  which  he  is 
a  member,  or  cannot  apply  deposit  of  trustee 
to  debt  of  the  trustee  where  his  indebtedness 
to  the  bank  is  personal.  Yol.  5,  p.  309,  Nov., 
1912. 

Where   depositor   has    two   accounts 

1220.  (111.)  A  bank  which  carries  both 
a  coinnieri'ial  and  a  savings  account  sul)mits 
for  consideration  four  check  forms  as  fol- 
lows :  Check  A  is  an  ordinary  form  of  bank 
check,  but  underneath  the  name  of  the  bank 
are  the  words  "savings  department,"  and  the 
check  contains  the  not<ition  "Book  must 
accompany  this  check,  otherwise  it  will  not 
be  honored,  unless  entry  is  made  in  book,  or 
book  is  left  for  entry  of  check  when  pre- 
sented." Cheek  B  is  the  ordinary  form  of 
bank  check.  Check  C  is  the  same  form 
with  the  words  "Commercial  Department" 
under  the  name  of  the  bank.  Check  D  is 
the  same  as  C  with  the  notation  "This  check 
is  to  be  paid  from  funds  on  deposit  in  com- 


149 


1221 


DICKST  OF  LKdAL  OI'INIOXS 


niorcial  do|)artinent  only."  The  bank  uses 
forms  A  and  B,  but  suggests  use  of  form  C 
to  guard  against  customer  who  overdraws 
his  commercial  account,  and  to  avoid  getting 
the  bank  into  tr()ul)le  in  declining  payment 
for  insuflicient  funds,  even  though  the  de- 
positor has  sudicient  fuiuls  in  his  savings 
account.  The  bank  asks  desirability  of  using 
forms  C  or  D.  Opinion:  Where  a  bank 
carries  both  a  commercial  and  savings  ac- 
count and  pays  an  overdraft  on  the  commer- 
cial account,  it  has  the  right  to  set  off  the 
check  against  the  customer's  savings  account, 
but  where  funds  in  the  savings  account  are 
payable  under  special  agreement,  requiring 
production  of  pass-book,  bank  is  not  obliged 
to  pay  overdraft  on  commercial  account  and 
charge  same  to  sufficient  funds  in  savings 
account.  The  adoption  of  form  C  would 
serve  the  useful  purpose  of  training  customer 
that,  in  withdrawal  of  funds  from  either 
commercial  or  savings  account,  a  special  form 
is  required.  Form  C  is  more  desirable  than 
form  D,  for  the  reason  that  the  notation 
on  the  latter  states  a  condition  which  may 
affect  its  negotiability.  Vol.  11,  p.  169, 
Sept.,  1918. 

1221.  (N.  J.)  Where  a  depositor  carries 
both  a  commercial  and  savings  account  with 
a  bank  and  is  indebted  to  the  bank  upon 
matured  notes,  and  the  funds  in  the  commer- 
cial account  are  insufficient,  a  New  York 
court  has  held  the  bank  has  no  right,  with- 
out the  depositor's  consent,  to  charge  the 
notes  to  the  depositor's  savings  account. 
The  opinion  in  this  case,  however,  is  merely 
obiter  and  would  seem  contrary  to  general 
principles  of  set  off.  Vol.  11,  p.  329,  Dec, 
1918. 

1222.  (N.  Y.)  A  depositor  besides  his 
ordinary  account  in  a  bank  carried  two  other 
accounts,  one  being  marked  "special"  and 
the  other  "agent."  The  bank  did  not  know 
whether  the  depositor  owned  the  funds  in 
said  two  accounts  or  whether  he  held  them  in 
a  fiduciary  capacity.  The  depositor  became 
indebted  to  the  bank,  created  by  an  over- 
draft on  his  personal  account,  and  the  bank 
seeks  to  apply  the  balance  in  either  of  the 
other  accounts  in  settlement.  Opinion:  The 
bank  can  set  off  the  overdraft  upon  the  ac- 
counts styled  "special"  and  "agent,"  pro- 
vided such  accounts  are  owned  by  the  de- 
positor in  liis  own  right  and  are  thus 
designated  merely  for  convenience.  But,  if 
the  accounts  so  marked  are  held  as  agent  or 
trustee  for  another,  they  cannot  (according 
to  the  weight  of  authority)  be  applied  upon 


the  depositor's  individual  indebtedness,  and 
the  bank  is  put  upon  inquiry  by  the  form 
of  the  account  so  styled.  \'ol.  9,  p.  577, 
.Jan.,  iyi7. 

1223.  (S.  C.)  A  depositor  carries  both 
a  cheeking  and  a  savings  account  with  a 
bank  and  is  indel)ted  to  the  bank  upon  a 
matured  loan  in  excess  of  the  checking  but 
witliin  the  savings  account.  Opinion:  The 
bank  can  charge  the  indebtedness  to  the  sav- 
ings account.     Vol.  7,  p.  384,  Dec.  1914. 

Unmatured  debt  set  off  against  bankrupt 

1224.  (Ark.)  A  depositor  owes  his  bank 
$1,100  on  a  note  not  yet  matured,  and  having 
quarreled  with  the  bank  intends  withdraw- 
ing his  account  and  doing  business  with 
another  bank.  He  refuses  to  allow  the  bank 
to  charge  his  account  with  the  amount  of 
the  note.  Opinion:  Unless  the  loan  made 
to  the  depositor  upon  his  note  was  induced 
by  fraud  upon  his  part  or  unless  he  is  now 
insolvent,  the  bank  would  have  no  right  to 
apply  his  deposit  upon  his  unmatured  note. 
A  bank  has  no  right  to  apply  a  deposit  to  a 
debt  of  the  depositor  until  such  debt  matures, 
unless  (as  held  in  some  states,  but  denied  in 
others)  the  depositor  becomes  insolvent  be- 
fore maturity,  or  unless  the  debt  has  been 
created  by  fraud,  in  which  event  the  credit 
given  for  the  note  can  be  rescinded.  Vol.  11, 
p.  169,  Sept.,  1918. 

1225  (Mo.)  A  bank  held  two  notes  of 
its  depositor,  one  being  a  demand  note  for 
$320,  the  other,  pavable  in  six  months,  for 
$1,000.  The  date  of  maturity  of  the  latter 
was  extended  three  months  by  contract  in- 
dorsed on  the  note.  Before  the  $1,000  note 
matured,  the  depositor  made  a  general  assign- 
ment to  creditors.  The  bank,  having  on  its 
books  $1,065  to  the  depositor's  credit,  debits 
the  amount  of  the  demand  note,  and  also 
seeks  to  set  off  the  unmatured  note.  Opin- 
ion: In  Missouri,  bank  holding  unmatured 
note  of  depositor  cannot  apply  balance  upon 
note  in  event  of  depositor's  insolvency. 
Where  maturity  of  note  extended  and  depos- 
itor becomes  insolvent  before  end  of  period 
of  extension,  note  is  unmatured  paper  and 
cannot  be  set  off  unless  contract  of  extension 
can  be  rescinded,  because  of  fraud  or  on  other 
equitable  ground.  Vol.  10,  p.  120,  Aug. 
1917. 

1226.  (N.  Y.)  A  depositor  made  a  gen- 
eral assignment.  The  bank  held  a  note  for 
a  larger  amount  than  his  balance,  but  not  yet 
due.     The  bank,  claiming  a  set  off.  holds  the 


150 


STOPPIXG  PAYMEXT 


1232 


money  until  maturity  of  the  note.  Opinion: 
Under  the  law  of  Xew  York  the  bank  cannot 
set  off  the  deposit  against  the  unmatured 
note,  but  the  rule  in  the  federal  courts  and 
under  the  Bankruptcy  Act  allows  a  set  off. 
Vol.  6,  p.  818,  June,  1914. 

1227.  (N.  Y.)  A  bank  made  a  loan  to 
its  customer  on  his  personal  note,  crediting 
the  customer  with  the  money  loaned.  The 
customer  has  drawn  75  per  cent,  of  the  money 
by  check  and  is  about  to  go  into  bankruptcy. 
The  note  is  past  due.  The  bank  cannot 
obtain  a  new  note  for  the  balance  due,  but 
has  a  verbal  understanding  with  the  customer 
that  no  more  money  Avill  be  drawn  out. 
Opinion:  The  bank  can  apply  the  deposit 
against  the  customer's  matured  note,  and  in 
case  of  his  bankruptcy  can  prove  its  claim 
against  the  estate  for  the  balance.  The  cir- 
cumstances of  this  case  do  not  sliow  tliat  a 
preferential  transfer  was  made.  A^ol.  (>,  ]>. 
575.  Feb.,  1014. 

1228.  (Ohio.)  The  general  rule  is  that  a 
bank  has  a  right  to  apply  a  deposit  to  the 
payment  of  any  nuitnred  debt  due  the  bank 
from  the  depositor.  It  has  been  held  in  Ohio 
and  other  states  (but  the  right  is  denied  in 
many  states)  that  a  bank  may  apply  a  deposit 
to  the  payment  of  the  depositor's  indebted- 
ness not  yet  matured,  provided  the  depositor 
is  insolvent.  Under  the  Xational  Bankrupt 
Act  a  bank  may  set  off  an  unmatured  note 
against  the  deposit  of  the  maker.  Vol.  5, 
p.  828,  June,  1913. 

1229.  (Pa.)  The  rule  that  a  bank  has  a 
right  to  set  off  a  deposit  against  its  cus- 
tomer's matured  indebtedness  applies  equally 
to  his  indebtedness  upon  paper  discounted 


for  the  customer  and  paper  of  the  customer 
purchased  from  a  third  person  in  the  usual 
course  of  business.  The  bank  purchasing 
from  a  third  person  would  have  the  right  to 
apply  the  deposit  of  the  maker  of  a  note 
equally  as  if  it  had  been  discounted  for  the 
maker  directly,  subject,  of  course,  to  the 
limitation  that  the  paper  was  acquired  in  the 
usual  course  of  business  and  not  purchased 
for  the  e.xpress  purpose  of  enabling  the  seller 
to  realize  out  of  the  funds  of  the  maker 
aj)proacliing  insolvency.  The  riglit  of  set 
off  of  unmatured  paper  upon  the  depositor's 
insolvency  is  not  recognized  in  Pennsylvania. 
The  rule  is  conflicting  in  other  states  but  it 
exists  under  tiie  Xational  Bankruj^t  Act. 
It  would  seem  competent  for  a  bank  to  make 
an  agreement  with  its  customer  giving  the 
former  the  right  to  such  set  off.  Vol.  10. 
p,  48,  July,  1917. 

1230.  (S.  Dak.)  Where  a  borrower  l)e- 
comes  bankrupt,  the  bank  has  the  right, 
under  the  provisions  of  the  Xational  Bank- 
rupt Law,  to  apply  his  deposit  upon  his 
notes,  though  unmatured.  Aside  from  the 
Bankrupt  Act,  the  right  of  set  off  of  an  un- 
matured note  against  the  deposit  upon  the 
insolvency  of  the  maker  is  recognized  in 
some  states  and  denied  in  others,  but  where 
the  right  is  given  by  contract  it  can  be 
enforced.  The  following  form  of  contract, 
if  inserted  in  the  borrower's  note,  would 
protect  the  bank:  "the  bank  at  which  this 
note  is  payable  is  hereby  authorized,  in  the 
event  of  the  maker's  insolvency  before  matur- 
ity hereof,  to  thereupon  apply  any  balance 
in  said  bank  standing  to  tlie  credit  of  the 
maker  in  pavmcnt  of  this  note.''  Vol.  7,  p. 
221,  Oct.,  lit  14. 


STOPPING  PAYMENT 

For  Revocation  of  Check  by  Bankruptcy,  210,  by  Death.  452  et  seq.;  by  Insanity  or  In- 
competency, 84G  et  seq.;  see  also  275,  302 


Accuracy  of  notice 

1231.  (Ala.)  In  A])ril  a  customer  wish- 
ing to  stop  payment  on  his  clieck,  notified 
the  bank  and  described  the  check  as  being 
for  $50,  payable  to  John  Doe  and  dated  some 
time  in  April,  the  exact  date  he  did  not  know. 
A  check  payable  to  John  Doe  for  $50  and 
dated  July  2  was  presented  and  paid  by  the 
bank.  The  customer  seeks  to  hold  the  bank 
liable  for  violating  his  stop  order.  He  claims 
he  omitted  to  date  the  check  and  the  payee 
supplied  the  date.  Opinion:  The  bank  is 
not   liable,   as  the  check   was   not   described 


witli  sufficient  accuracy.  When  stopping  pay- 
ment he  did  not  describe  the  check  as  dated, 
l)ut  stated  it  was  dated  in  April.  This  mis- 
description was  material.  Vol.  9,  p.  349, 
Oct.,  191(5. 

1232.  (Cal.)  .\  l)ank  having  before  it 
an  order  sto})i)ing  payment  of  a  post-dated 
check,  describing  the  check  by  name  of  the 
drawer,  number,  date,  amount  and  payee, 
nevertheless  paid  the  check  when  presented 
on  the  day  of  its  date  because  the  number  of 
the  check  (12)  was  different  from  that  (13) 
given  in  the  stop  order.     The  bank  endeav- 


151 


1233 


I)I(;est  of  legal  opinions 


ored  in  vain  to  rcacli  the  drawer  before  pay- 
ment, but  construed  the  order  to  refer  to 
another  cheek.  Opinion:  Nolwithstandinf,' 
a  mistake  in  the  number  of  the  check,  tlic 
order  was  sunicient  as  an  instruction  to  the 
bank  not  to  pay  the  presented  ciieck.  Vol. 
8,  p.  144,  Aug.,  1915. 

Bank's  liability  for  payment 

1233.  (N.  J.)  A  depositor  drew  his 
check  and  ten  days  later  stopped  payment. 
Through  an  oversight  the  bank  paid  the 
check.  Opinion:  The  bank  is  liable  to  depos- 
itor for  any  resultant  damage;  but  if  the 
bank  could  prove  payment  had  been  made  to 
a  holder  who  had  enforceable  rights  against 
the  drawer,  probably  it  would  escape  liabil- 
ity.   Vol.  5,  p.  595,  March,  1913. 

1234.  (Ohio.)  A  depositor,  after  his 
check  had  been  paid  and  returned  to  him  as 
a  paid  voucher,  in  ignorance  thereof,  issued 
a  duplicate  check  and  notified  the  bank  in 
writing  not  to  pay  the  original.  Opinion: 
The  bank  is  not  liable  to  the  depositor  because 
the  duplicate  is  paid.  The  bank  is  not 
chargeable  with  knowdedge  that  the  original 
was  paid  and  returned  and  that  the  stop 
payment  order  was  issued  in  error.  Vol.  8, 
p.  517,  Dec,  1915. 

1235.  (Pa.)  A  gave  B  his  check  which 
B  lost,  after  he  had  indorsed  it  in  blank. 
A  stopped  payment,  but  the  bank  inadvert- 
ently paid  the  check  contrary  to  the  stop 
order.  Opinion:  If  check  paid  to  a  holder 
in  due  course,  bank  not  liable  for  loss  because 
drawer  not  damaged,  holder  having  right  to 
enforce  payment  from  drawer  and  payee  and 
check  operating  as  payment  of  drawer's  debt 
to  payee ;  but  if  check  paid  to  finder  or  other 
than  holder  in  due  course,  drawer's  debt  to 
payee  would  remain  and  bank  would  be  liable 
for  loss.    Vol.  10,  p.  118,  Aug.  1917. 

Cashier's  and  certified  checks 

See  50,  54,  55 

1236.  (Mont.)  A  cashier's  check  upon 
which  there  were  three  indorsements  was  piir- 
chased  by  a  bank  and  presented  by  it  to  the 
drawee,  where  payment  had  been  stopped  be- 
cause of  fraud.  Opinion:  The  purchasing 
bank  has  recourse  upon  the  drawer  as  well 
as  upon  the  indorsers,  provided  they  have 
been  duly  charged.  Vol.  7,  p.  898,  May, 
1915. 

1237.  (Ga.)  A  bank  certified  a  check 
for  the  drawer,  who  later  requested  the  bank 


to  stop  payment,  as  the  agreement  was  not 
fulfilled.  Opinion:  The  drawer  cannot  stop 
payment  as  a  matter  of  right,  but  where  the 
drawer  has  been  defrauded  the  bank  may  in 
some  cases  comply  with  the  drawer's  request 
and  refuse  payment  upon  receiving  proper  in- 
demnity against  ultimately  being  com])el!ed 
to  pay  the  holder.  A^ol.  0,  p.  750.  May, 
1914. 

1238.  (Mo.)  The  customer  of  a  bank 
})urchused  its  cashier's  check  of  $600,  pay- 
able to  his  order.  Afterwards  without  giving 
any  specific  reason  he  wired  the  bank  a  re- 
quest to  stop  payment  and  upon  presentment 
of  the  check  payment  was  refused  and  the 
item  protested.  Later  the  bank  learned  that 
the  customer  had  delivered  the  check  in  some 
trade  and  becoming  dissatisfied  wired  the 
stop  payment  order.  The  bank  is  threatened 
with  a  suit  by  the  holder  to  enforce  payment 
of  the  check.  Opinion:  Certified  and  cash- 
ier's checks,  being  used  in  place  of  money,  the 
courts  refuse,  as  a  general  proposition,  to  per- 
mit the  issuing  bank  to  refuse  payment  and 
defend  against  the  holder,  even  though  he 
has  procured  the  check  from  the  bank's  cus- 
tomer by  fraud.  In  New  Jersey,  however, 
it  has  been  held — contrary  to  decisions  else- 
where— that  where  a  check  has  been  certified 
for  the  drawer  before  delivery  by  him  (as 
distinguished  from  certification  for  the  holder 
after  delivery  by  the  drawer)  the  certifying 
bank  can  plead  fraud  of  the  holder  upon  the 
drawer  in  defense  of  pavment;  In  this  case 
the  bank  is  the  primary  debtor  upou  the  check 
and  is  liable  thereon  to  the  holder  who  has 
the  legal  title  by  indorsement.  Vol.  11,  p. 
387,  Jan.,  1919. 

1239.  (N.  J.)  A  contractor  delivered 
his  certified  check  for  $1,000  as  liquidated 
damages  prior  to  entering  upon  a  contract  for 
municipal  improvements.  The  contract  was 
offered  to  him,  but  he  refused  to  sign  and  do 
the  work.  His  certified  check  was  deposited 
and  returned  by  the  bank  stamped  "payment 
stopped."  The  municipality  seeks  to  recover 
the  amount.  Opinion:  Where  check  certified 
for  the  drawer  and  payment  is  stopped  by 
the  bank  at  the  instance  of  the  drawer,  the 
bank  can  defend  against  a  fraudulent  holder, 
but  where  the  certified  check  is  delivered  as 
liquidated  damages  upon  failure  to  perform  a 
contract  according  to  bid,  the  certifying  bank 
and  drawer  are  both  liable  thereon.  Vol.  10, 
p.  125,  Aug.,  1917. 

1240.  (N.  Y.)  A  firm  in  New  York  re- 
ceived a  certified  check  on  a  New  Jersey  bank 
in  payment  of  merchandise.     The  check  was 


152 


STOPPING  PAYMENT 


1247 


forwarded  through  a  local  bank,  and  when 
presented  payment  had  been  stopped  by  the 
maker.  Opinion:  The  courts  generally  hold 
that  after  a  bank  has  certified  a  check, 
whether  for  the  drawer  or  the  holder,  it  is 
obligated  thereon  as  for  so  much  money,  and 
cannot  interpose,  in  defense  of  payment,  an 
equity  of  the  drawer  against  the  payee  or 
holder.  In  New  Jersey,  however,  where  a 
check  is  certified  for  a  fraudulent  payee,  the 
bank  is  liable  to  him  and  cannot  plead  fraud 
upon  the  drawer  in  defense;  but  where  the 
check  is  certified  for  the  drawer  the  bank 
can  refuse  payment  and  plead  fraud  of  the 
payee  in  obtaining  check  from  drawer  in  de- 
fense of  liability  to  payee.  Vol.  11,  p.  440, 
Feb.,  1919. 

1241.  (Pa.)  A  purchases  goods  from  B 
giving  in  payment  his  check  and  B  procures 
its  certification.  B  fails  to  deliver  the  goods 
and  A  requests  bank  to  refuse  payment. 
Opinion:  Where  check  has  been  certified  for 
payee  and  drawer  afterwards  reqiiests  bank 
to  refuse  payment,  some  cases  hold  (a)  bank 
liable  on  check  even  to  fraudulent  payee 
while  others  hold  (b)  bank  not  liable  to  payee 
who  has  received  check  through  fraud  or  with- 
out consideration  or  where  drawer  has  set  off 
against  payee.  The  point  has  not  been  de- 
cided in  Pennsylvania.  Bank  is  liable  on  its 
certified  check  in  any  event  to  an  innocent 
purchaser  for  value.  Vol.  6,  p.  680,  April, 
1914. 

Disclaimer  of  liability  for  payment  of 
stopped  checks 

1242.  (Ala.)  In  a  form  submitted  for 
protection  of  a  bank  in  case  of  payment  of  a 
stopped  check,  the  bank  acknowledges  receipt 
of  the  stop-payment  order  and  states  that  "we 
will  make  every  effort  to  protect  you,  but  will 
not  hold  ourselves  responsible  in  case  of  pay- 
ment.'' Opinion:  According  to  a  decision  in 
New  York  the  bank,  notwithstanding  such 
form  of  notice  or  agreement,  will  not  be  re- 
lieved from  responsibility  for  payment  of  a 
stopped  check  unless  it  has  been  free  from 
negligence  in  making  payment.  Vol.  5,  p. 
594.  March,  19i;i. 

1243.  (N.  Y.)  A  depositor  agrees  to 
hold  a  bank  harmless  in  the  event  the  bank 
inadvertently  pays  a  check  after  a  stop  pay- 
ment notice  has  been  received.  In  this  case, 
the  stop  payment  agreement  is  not  merely  a 
statement  in  the  pass-book,  but  is  actually 
signed  by  the  depositor.  Is  the  bank  ab- 
solved from  liability?     Opinion:  The  agree- 


ment being  virtually  one  exempting  the  bank 
from  liability  for  its  own  negligence  will  be 
strictly  construed.  Such  exemption  contracts 
are  not  favored  by  the  courts  and  will,  if  pos- 
sible, be  construed  in  such  a  way  as  not  to 
relieve  from  negligence.  How  a  specific  con- 
tract of  this  kind  would  be  construed  has  not 
been  decided  and  cannot  be  foretold  with  cer- 
tainty. Contracts  for  immunity  from  negli- 
gence will  be  upheld  in  the  State  of  New  York 
if  expressed  in  unequivocal  terms.  Vol.  11, 
p.  495  March,  1919. 

1244.  (N.  Y.)  A  clause  is  inserted  in  a 
stop  payment  order  to  a  bank  which  reads  as 
follows:  "Should  you  pay  this  check  through 
inadvertency  or  oversight,  it  is  expressly  un- 
derstood that  you  will  in  no  way  be  held  re- 
sponsible." Opinion:  It  is  doubtful  wheth- 
er under  this  clause  the  courts  will  relieve 
the  bank  in  all  cases  of  mistaken  payments  of 
stopped  checks,  irrespective  of  whether  or  not 
the  bank  has  used  reasonable  care.  The  ten- 
dency of  the  courts  to  to  attach  to  all  agree- 
ment relieving  the  bank  from  liability  an 
implied  condition  that  the  bank  on  its  part 
must  exercise  reasonable  care.  Vol.  9,  p. 
318,  Oct.,  1916. 

Duty  to  obey  instructions 
See  850,   1159 

1245.  (Kan.)  A  gives  his  check  in  pay- 
ment of  a  horse,  and  later,  finding  the  horse 
not  as  represented,  stops  payment  on  the 
check,  which  had  been  indorsed  to  a  holder 
in  due  course.  The  bank  refuses  to  pay. 
Opinion:  Such  holder  has  no  remedy  against 
the  drawee  bank,  but  must  look  to  the  drawer 
and  any  prior  indorsers.  It  is  not  for  the 
bank  to  go  into  the  equities  of  the  case  be- 
tween holder  and  drawer,  as  its  duty  is  solely 
to  its  customer.  The  rule  is  otherwise  in  a 
few  states  where  a  check  is  regarded  as  an 
assignment  of  funds.  Vol.  2,  p.  335,  Feb., 
1910. 

XoTK:  The  oiiactniont  of  the  Negotiable  Instru- 
ments Law  in  all  states  except  Georgia  lias  abol- 
ished  tins  last  stated   rule. 

1246.  (Minn.)  A  depositor  purchased 
goods,  giving  his  check  in  pa^Tiient.  Upon 
discovering  an  error  he  stopped  payment. 
Tiie  holder  presented  the  check  at  the  drawee 
hank  and  demanded  payment.  Opinion:  The 
l)ank  was  in  duty  bound  to  obey  the  instruc- 
tion and  refuse  payment,  and  it  incurred  no 
liabilitv  to  the  holder  for  such  refusal.  Vol. 
r,  p.  897,  :Nray,  1915. 

1247.  (Pa.)  A  depositor  purchases 
goods  of  a  wholesaler  giving  his  check  in 


153 


1248 


DIGEST  OF  LEGAL  OriNIOXS 


payinciit.  Aflor  rccoiviiifj  the  ^oods  the  de- 
positor stops  payment.  Opinion:  The  draw- 
er's liahility  to  punishment  for  obtaininj^ 
^^oods  under  false  pretenses  depends  upon 
proof  of  intent  to  stop  payment  at  the  time 
of  giving  the  check.  A  liank  is  not  liable  to 
the  holder  for  obeying  tlic  stop  payment  order 
of  its  depositor,  but  where  the  drawer  con- 
tinually practices  such  fraud,  the  best  course 
for  tlie  hank  is  to  close  his  account.  Vol.  7, 
p.  778,  April,  IDLl 

1248.  (S,  C.)  A  customer  issues  his 
clieek  in  payment  of  an  automobile.  Find- 
ing the  machine  unsatisfactory,  he  instructs 
his  bank  not  to  honor  the  check.  A  third 
party,  the  collecting  bank,  presents  the  item 
and  payment  is  refused.  Both  the  hank  and 
the  customer  are  sued  for  non-payment. 
Opinion:  Drawee  bank  must  obey  customer's 
instruction  not  to  pay  check  where  given  be- 
fore acceptance  or  payment  and  is  not  liable 
to  holder  for  refusing  payment.  Vol.  11,  p. 
40,  July,  1918. 

Notes  payable  at  bank 

1249.  (Ala.)  In  the  event  the  maker  of 
a  note  payable  at  a  bank  does  not  desire  bank 
to  pay  at  maturity,  it  is  necessary  for  him  to 
stop  payment;  where  the  bank  wrongfully  re- 
fuses to  pay  a  check  when  in  funds,  the  courts 
have  in  many  cases  awarded  the  depositor 
damages  for  injury  to  his  credit,  and  it  would 
seem,  the  same  principle  would  apply  to  notes 
payable  at  bank.     Vol.  4,  p.  304,  Nov.,  1911. 

1250.  (N.  Y.)  Note  payable  at  bank  is 
equivalent  to  order  to  bank  to  pay  same  for 
account  of  maker  and  latter  has  right  to  stop 
payment.     Vol.  7,  p.  39,  July,  1914. 

1251.  (Pa.)  A  gave  his  promissory  note 
to  B,  payable  at  A's  bank.  B  negotiated  the 
note  in  his  own  bank  and  at  maturity  pay- 
ment was  stopped,  although  there  were  suffi- 
cient funds  to  cover  the  note.  Opinion:  A 
note  payable  at  a  bank  constitutes  an  order 
to  the  bank  to  pay  the  same  for  the  account 
of  the  maker,  but  payment  should  be  refused 
where  the  maker  instructs  the  bank  not  to 
pay.     Vol.  6,  p.  628,  March,  1914. 

1252.  (Wash.)  B  purchased  goods  of 
A,  giving  him  in  payment  an  acceptance 
covering  the  invoice,  payable  at  a  bank  at  a 
future  date.  Before  maturity  B  stopped 
pajnnent,  although  B  had  on  deposit  in  the 
bank  sufficient  funds.  Opinion:  An  accep- 
tance or  note  payable  by  the  acceptor  or  maker 
at  a  bank  is  not  an  assignment  of  the  deposit 


to  the  holder  and  is  subject  to  countermand 
by  the  maker  before  the  bank  has  paid  the 
acc('[)tance  or  accepted  or  paid  the  note.  Vol. 
9,  p.  GGl,  Feb.,  1917. 

Notice  holds  good  indefinitely 

1253.  (N.  J.)  An  order  to  stop  payment 
can  be  made  by  a  customer  to  his  bank  before 
the  check  has  been  paid  or  accepted  and  such 
order  does  not  expire  after  a  certain  time 
limit,  but  holds  good  indefinitelv.  Vol.  9,  p. 
582,  Jan.,  1917. 

1254.  (Va.)  A  hank  which  pays  a  check 
after  receiving  a  stop-order  from  its  depos- 
itor does  so  at  its  peril.  The  usual  custom  of 
banks  in  Xew  York  City  with  respect  to  ac- 
cepting notices  of  stop-payment  is  to  keep 
the  orders  on  file  indefinitely;  if  a  check  is 
three  or  four  years  old,  the  banks  inquire  of 
the  drawer  whether  or  not  there  was  a  stop- 
payment  order.     Vol.  1,  p.  296,  Feb.,  1909. 

Oral  notice 

1255.  (Ala.)  Under  the  Negotiable  In- 
struments Law  a  drawee  bank  is  not  liable  to 
the  holder  of  a  check,  unless  it  accepts  or 
certifies  the  check,  and  the  maker  has  the 
right  to  stop  payment.  An  oral  notice  to  stop 
payment  is  probably  sufficient  and  a  written 
order  is  not  necessary,  although  the  point  has 
not  yet  been  judiciallv  passed  upon.  Vol. 
4,  p.  376,  Dec,  1911. 

Note:  In  Peoples  Sav.  Bank  it  Tru«t  Co.  v. 
Lacey,  40  So.  (Ala.)  346  it  was  held  that  a  de- 
positor may  prove  a  verbal  notice  given  hy  him 
l)efore  payment  to  the  bank's  receiving  teller  not 
to  pay  a  check,  though  afterwards  at  request  of 
the  teller  he  reduced  the  notice  to  \vriting. 

1256.  (Del.)  The  customer  of  a  bank 
met  its  cashier  at  a  social  function  and 
verbally  notified  him  to  stop  payment  on  a 
certain  check.  The  next  day  the  cashier 
made  a  written  memorandum  of  the  order. 
About  a  month  later  the  check  was  paid. 
Opinion:  The  notice  was  valid  and  binding 
on  the  bank.  The  law  does  not  require  that 
the  notice  be  in  writing,  and  although  an 
oral  notice  might  not  be  valid  when  given 
outside  of  the  bank,  the  fact  that  a  written 
memorandum  of  the  notice  was  made  by  the 
cashier  at  the  hank  would  validate  it.  Vol. 
1,  p.  299,  Feb.,  1909. 

1257.  (N.  Dak.)  A  made  his  check  to 
B  in  payment  of  a  debt  but  later  verbally 
stopped  payment  because  he  had  settled  the 
debt  by  giving  B  a  note.  Two  years  later, 
after  the  debt  was  paid,  B  deposited  the  check 
for  collection  and  the  same  was  paid.     Opin- 


154 


STOPPIXG  PAYMENT 


1265 


ion :  The  drawee  cannot  charge  the  amount  to 
A's  account,  because  it  has  violated  the  stop 
order  and  has  paid  a  stale  check.  The 
drawee,  however,  can  recover  from  the  payee 
under  the  rule  that  money  obtained  by  deceit 
and  in  bad  faith  is  recoverable.  Vol.  9,  p. 
51,  July,  1916. 

1258.  (Okla.)  John  Jones  issued  a 
check,  wliieh  was  presented  and  paid  about 
one  year  later.  The  depositor  claimed  that 
he  stopped  payment  a  few  days  after  the  issue, 
but  the  bank  had  no  record  of  the  stop  order. 
Opinion :  If  the  depositor  can  prove  an  oral 
instruction  not  to  pay,  he  can  recover,  unless 
the  bank  can  prove  that  the  check  when  paid 
was  in  the  hands  of  a  holder  in  due  course 
•who  could  enforce  the  check  against  the 
drawer.  If  a  check  is  stale  it  places  the  bank 
on  inquiry  before  payment,  but  whether  a 
check  one  year  old  can  be  called  stale  is  an 
unsettled  question.  Vol.  5,  p.  658,  April, 
1913. 

Practice  of  stamping  "payment  stopped" 

1259.  (N.  Y.)  Following  its  usual  cus- 
tom, a  bank  to  whom  a  check  was  presented 
stamped  across  the  face  "payment  stopped" 
and  returned  the  same  to  the  payee.  The 
maker  of  the  check  had  previously  counter- 
manded payment.  The  payee  claimed  that 
as  the  check  was  his  property,  the  bank  had 
no  right  to  deface  it  by  such  stamp.  Opin- 
ion: Custom  of  bank  to  stamp  a  counter- 
manded check  "Payment  stopped*'  before  re- 
turning to  the  holder  serves  a  beneficial  pur- 
pose without  injury  to  a  bona  fide  holder  and 
will  doubtless  be  sustained  by  the  courts.  Vol. 
10,  p.  205,  Sept.,  1917. 

1260.  (N.  Y.)  There  is  no  law  express- 
ly forbidding  a  drawee  bank  from  stamping 
"payment  stopped"  upon  a  check,  which  has 
been  refused  for  that  reason.  Such  a  prac- 
tice has  the  beneficial  result  of  warning  sub- 
sequent holders  that  payment  has  been  stop- 
ped, thereby  preventing  further  negotiation. 
A"ol.  4,  p.  92,  Aug.,  1911. 

1261.  (Pa.)  A  bank  refused  payment  of 
a  check  in  pursuance  of  instruction  from  the 
drawer  not  to  pay,  and  stamped  "payment 
stopped"  upon  the  instrument,  before  return- 
ing the  same  to  the  holder.  The  presenting 
bank  objected  to  this  action,  taking  the  posi- 
tion that  the  drawee  had  no  right  to  so  mark 
the  check,  which  was  not  its  property.  Opin- 
ion: The  act  of  stamping  "payment  stopped" 
upon  the  check  was  proper  in  view  of  the 
custom  so  to  do,  the  beneficial  purpose  there- 


by served,  and  the  fact  that  no  substantial 
right  of  the  holder  is  violated.  Vol.  4,  p. 
681,  May,  1912. 

NoTK:  It  has  been  held  that  no  action  for 
dama<,'e  will  lie  against  a  bank  for  defacing  a 
note,  as  by  writing  on  the  face  there<if  the  words 
"payment  stopped."  McKinlev  r.  American  Ex- 
change Bank,  7  Rob.   (X.  Y.)  "603. 

Recovery  by  drawee 
See  580 

1262.  (Miss.)  A  bank  was  notified  by 
its  customer  not  to  pay  his  check  and  there- 
after, in  violation  of  the  stop  order,  makes 
payment  to  an  innocent  holder  under  a  forged 
indorsement.  The  bank  contends  that  tiie 
holder  is  liable  upon  the  forged  indorsement. 
The  holder  claims  that,  payment  having  been 
stopped,  it  should  have  been  notified  immed- 
iately on  payment,  as  it  might  have  had  op- 
portiinity  to  protect  itself.  Opinion:  It  has 
been  held  that  the  case  does  not  fall  within 
the  general  rule  allowing  the  drawee  to  re- 
cover money  paid  upon  a  forged  indorsement 
but  that  the  bank,  making  payment  in  face 
of  the  stop  order,  is  precluded  from  setting 
up  the  forgery  of  the  indorsement  and  can- 
not recover  the  money  paid  from  an  innocent 
holder  who  has  received  pavment.  Vol.  11, 
p.  93,  Aug.,  1918. 

1263.  (Mont.)  Bank  which  pays  stop- 
ped check  to  a  bona  fide  holder  cannot  after- 
wards recover  back  tlie  money,  but  payment 
to  fraudulent  holder  is  probably  recoverable. 
Where,  however,  holder  has  taken  check  as 
gift  and  receives  payment  in  good  faith  with- 
out notice  of  countermand  by  drawer  it  would 
seem  that  payment  is  irrevocable.  Vol.  9,  p. 
49.  July,  1916. 

1264.  (N.  Y.)  The  drawer  of  a  check 
stopped  payment.  The  drawee  attached  a 
slip  to  the  item,  indicating  that  payment  was 
stopped  and  returned  it  to  the  collecting 
bank.  Later,  through  the  fraud  of  the  payee, 
tlie  check  was  presented  a  second  time  and 
paid  by  the  drawee  bank'.  Opinion:  The 
drawee  cannot  charge  the  amount  to  the  draw- 
er's account,  but  wliere  payee  induced  pay- 
ment throiigh  fraud,  the  general  rule  that 
payment  to  a  bona  fide  holder  is  a  finality 
does  not  apply,  and  the  bank  has  the  right  of 
recovery  from  the  pavee.  Vol.  7,  p.  777. 
April,  1915. 

1265.  (Pa.)  A  customer  requested  his 
bank  to  sto]>  payment  on  his  check  of  $200. 
The  stop  order  was  unfortunately  overlooked 
and  the  check  was  paid.  The  bank  had  evi- 
dence from  the  holder  that  the  maker  re- 


155 


12GC:i 


DIGEST  OF  LEGAL  OPINIONS 


ceivcd  value  for  the  check,  and  the  hohler  re- 
fuses to  refund  the  amount.  In  tlie  event  the 
maker  recovers  the  amount  from  the  bank,  it 
believes  he  will  be  receiving  double  value. 
Opinion:  Where  a  bank  pays  a  stopj)0(l  check 
it  docs  so  at  its  peril,  hut  where  i)ayment  is 
made  to  a  liolder  in  due  course  or  where  the 
drawer  has  received  full  value  for  the  check, 
there  is  ground  for  maintaining  the  conten- 
tion that  the  bank  can  set  oiT  the  amount 
against  the  drawer's  account  as  equitable 
purchaser  of  the  check.  Where  a  stopped 
check  is  an  enforceable  obligation  against  the 
drawer  in  the  hands  of  a  holder  in  due  course, 
the  former  is  not  damaefcd  because  of  its  pay- 
ment by  the  bank,  for,  if  refused  payment, 
the  drawer  would  be  answerable  to  such 
holder.     Vol.  10,  p.  463,  Dec,  1917. 

Rights  of  holder  in  due  course 

See  506  ct  scq.,  646  et  seq.,  1265 

1266.  (Ariz.)  A  bank  purchased  a  New 
York  draft  of  $50  from  A,  who  received  the 
instrument  in  payment  for  goods  delivered  to 
B.  The  draft  was  presented  and  the  payment 
was  stopped  by  the  bank  issuing  the  draft  at 
the  request  of  B,  the  payee,  who  discovered 
that  the  goods  had  been  mortgaged.  Opinion: 
The  purchasing  bank,  as  a  holder  in  due 
course,  can  recover  payment  from  the  issuing 
bank  and  from  the  prior  indorsers  and  its 
rights  cannot  be  defeated  by  stopping  pay- 
ment. The  drawee  bank,  however,  is  in  duty 
bound  to  obey  the  stop  payment  order.  Vol. 
9,  p.  585,  Jan.,  1917. 

1267.  (Cal.)  John  Doe  purchased  from 
a  stranger  an  automobile  appliance,  giving 
his  check  of  $50  in  payment.  Having  be- 
come dissatisfied  with  the  article,  he  stopped 
pa}Tiient.  In  the  meantime,  a  bank  in  good 
faith  cashed  the  check  from  the  stranger,  and 
John  Doe  refuses  to  pay  the  amount.  Opin- 
ion: A  bank  which  in  good  faith  purchases  a 
check  from  the  payee  without  notice  of  any 
defense  thereto  is  a  holder  in  due  course  and 
can  hold  the  drawer  liable  for  the  full  amount 
thereof,  free  from  his  defense  against  the 
payee.     Vol.  11,  p.  389,  Jan.,  1919. 

1268.  (Colo.)  A  client  purchased  from 
a  bank  a  draft  drawn  by  it  on  its  Chicago  cor- 
respondent for  $2,500.  Two  days  after  said 
issue,  upon  the  payee's  request  given  at  the 
time,  the  bank  stopped  payment  on  its  draft, 
which  had  come  into  the  hands  of  an  innocent 
purchaser  for  value.  The  holder  now  seeks 
to  recover  damages  from  the  drawer  of  the 
check,  besides  the  amount  of  the  draft. 
Opinion:  The  drawer  of  a  check  who  stops 


its  payment  at  the  request  of  the  payee  is 
liable  thereon  io  a  holder  in  due  course  for 
its  face  amount  with  interest  and  protest  fees, 
together  with  court  costs  in  case  of  suit;  but 
there  is  no  additional  liability  to  such  holder 
for  damages  because  of  such  stoppage  of  ))ay- 
ment.  The  rule  is  that  where  a  bank  wrong- 
fully refuses  payment  of  its  customer's  check, 
the  latter  has  a  right  of  action  for  damages 
in  addition  to  the  amount  of  the  check,  be- 
cause of  injury  to  his  credit,  but  the  reason 
for  allowing  damages  in  such  a  case  does  not 
apply  to  an  indorser  as  in  this  case.  The 
holder  does  not  receive  injury  to  his  credit 
by  non-payment  of  the  check,  because  it  is  not 
his  check  which  has  been  dishonored,  but  the 
check  of  someone  else.  Vol.  11,  p.  275,  Nov. 
1918. 

1269.  (Colo.)  A  gave  his  check  in  pay- 
ment for  beaver  hides.  The  check  was  pur- 
chased from  the  payee  by  a  bank.  Later  A 
was  arrested  for  having  the  hides  in  his  pos- 
session during  the  closed  season,  being 
contrary  to  law,  and  accordingly  stopped 
payment  of  the  check.  Opinion:  The  bank 
purchasing  the  check  from  the  payee  may 
enforce  payment  from  the  drawer,  if  it  ac- 
quired the  check  without  knowledge  of  the 
illegal  consideration.  Vol.  6,  p.  34,  July, 
1913. 

1270.  (Colo.)  A  bank  in  Colorado  sold 
its  draft  on  a  New  York  bank  to  A,  who  gave 
it  to  B  to  close  up  a  deal.  B  cashed  the 
draft  with  C.  Payment  was  stopped  by  A 
because  of  fraud.  Opinion:  C  as  bona  fide 
purchaser  for  value  of  the  stopped  draft  which 
has  been  duly  protested  has  recourse  upon  the 
drawer  and  prior  indorsers.  Vol.  5,  p.  373, 
Dec,  1912. 

1271.  (111.)  A  issued  his  check  to  B  for 
$650.  Before  negotiation  A  notified  B  that 
he  had  stopped  payment  because  of  fraud. 
Disregarding  the  notice,  B  negotiated  the 
check  to  C,  who  had  no  notice  of  the  stop 
payment  and  who  gave  part  cash  and  the 
balance  for  a  bill  owed  by  B  to  C.  Opinion: 
C  may  recover  from  A,  as  he  was  an  innocent 
purchaser  for  valuable  consideration.  Vol.  8, 
p.  611,  Jan.,  1916. 

1272.  (Kan.)  A  check  was  issued  in 
pa3inent  for  certain  goods.  Shortly  there- 
after the  drawer  discovered  he  had  been  de- 
frauded and  stopped  payment  of  the  check. 
In  the  meantime  a  bank  cashed  the  check. 
Opinion:  The  bank  which  cashed  the  check 
for  the  payee  was  a  holder  in  due  course  and 
can  enforce  payment  from  the  drawer.  Vol. 
8,  p.  913,  April,  1916. 


156 


STOPPIXG  PAYMENT 


1284 


1273.  (La.)  A  live  stock  dealer  pur- 
chased five  head  of  cows,  giving  his  check  for 
$95  in  payment.  He  drove  the  cattle  to  an- 
other state  and  then  stopped  payment  of  the 
check,  which,  in  the  meantime,  had  been 
purchased  by  a  bona  fide  holder.  Opinion: 
The  holder  can  enforce  payment  from  the 
drawer  and  prior  indorser,  assuming  the 
latter's  liability  has  been  preserved  by  due 
notice  of  dishonor.  As  to  criminal  liability, 
the  drawer  could  be  convicted  of  obtaining 
goods  upon  false  pretenses,  provided  a  jury 
could  be  convinced  that  he  gave  the  check 
and  received  the  cattle  with  the  fraudulent 
intent  to  stop  payment  of  the  check.  Vol.  7, 
p.  777,  April,  1915. 

1274.  (Neb.)  A  gave  B  his  check, 
which  was  indorsed  by  B  to  C.  For  some 
reason  of  his  own,  B  stopped  payment  of  the 
check.  Opinion:  B  had  no  right  to  stop  pay- 
ment, but  where  the  drawer  stops  payment 
at  the  payee's  request,  a  holder  in  due  course 
may  hold  both  drawer  and  pavee  liable.  Vol. 
7,  p.  307,  Nov.,  1914. 

1275.  (Neb.)  A  gave  B  his  check,  which 
was  cashed  by  C.  C  was  later  notified  not 
to  cash  the  check,  because  A  had  stopped 
payment.  Opinion:  C  having  cashed  the 
check  for  B  in  good  faith  can  recover  from 
the  drawer.     Vol.  5,  p.  245,  Oct.,  1912. 

1276.  (Okla.)  F.  Brothers  issued  their 
check  to  A.  S.  Brown,  who  used  it  in  payment 
of  a  bill  which  he  owed  to  A.  F.  Brothers, 
discovering  that  they  had  been  defrauded  by 
Brown,  stopped  payment  of  the  check. 
Opinion:  A,  the  innocent  purchaser  for  value 
of  the  check,  can  recover  from  F.  Brothers. 
Vol.  8,  p.  33,  July,  1915. 

1277.  (Okla.)  The  drawer  of  a  check 
who  purchased  several  bales  of  cotton  from 
A,  discovered  that  the  cotton  was  mortgaged 
and  immediately  stopped  payment  of  the 
check.  In  the  meantime  A  had  received  the 
money  from  a  bona  fide  purchaser  of  the 
check.  Opinion:  The  drawer  had  the  right 
to  stop  payment  of  the  check,  l)ut  he  would 
still  be  liable  to  the  purchasing  bank  which 
cashed  the  check  in  good  faith.  A^'ol.  4,  p. 
431,  Jan.,  1912. 

1278.  (Pa.)  A  gave  his  check  to  B,  who 
cashed  it  with  C,  and  later  payment  was 
stopped  by  A.  Opinion:  C,  who  purchased 
from  B  without  notice,  was  a  holder  in  due 
course  and  can  enforce  pavment  from  A. 
Vol.  8,  p.  1103,  June,  1916.' 

1279.  (Pa.)  A  purchaser  gave  his  check 
in  payment  for  some  goods  which  were  not 


as  represented.  The  drawer  stopped  pay- 
ment, but  in  the  meantime  the  payee  of  the 
check  cashed  it  at  a  national  bank.  The 
payee  was  irresponsible.  Ojnnion:  The  na- 
tional bank,  which  purchased  the  check  in  the 
regular  course  of  business,  is  a  holder  in  due 
course  and  can  recover  the  amount  and  pro- 
test fees  from  the  drawer.  Vol.  6,  p.  438, 
Dec,  1913. 

1280.  (Tenn.)  A  customer  issued  his 
check  of  $22  to  a  negro  in  payment  for  a  cow, 
and  later  stopped  payment  thereon  when  he 
learned  that  the  cow  had  been  stolen.  In 
the  meantime  the  negro  had  cashed  the  check 
at  a  bank.  Opinion:  The  liank  was  an  inno- 
cent purchaser  for  value  and  as  such  can  en- 
force pavment  from  the  drawer.  Vol.  8,  p. 
33,  July;  1915. 

1281.  (Tex.)  A  gave  B  his  check  for 
$100.  B  indorsed  to  C,  who  cashed  it  with 
Jones,  an  innocent  party.  B  on  discovering 
that  C  had  defrauded  him,  requested  the 
drawee  not  to  pay,  which  request  was  com- 
plied with.  Opinion:  Jones  can  enforce  pay- 
ment from  the  drawer  and  prior  parties,  free 
from  the  defense  of  fraud,  l)ut  cannot  com- 
pel the  bank  to  pay.  Vol.  7,  p.  165,  Sept., 
1914. 

1282.  (Wash.)  A  bank  cashed  a  check 
indorsed  by  the  payee  and  another.  Payment 
of  the  check  was  stopped  because  the  maker 
received  no  consideration  from  the  j>ayee. 
Opinion:  The  bank  which  ])urchased  the 
check  in  good  faith  can  enforce  payment  from 
the  drawer,  free  from  the  latter's  defense 
against  the  payee.  Vol.  7,  p.  776,  April, 
1915. 

Where  instrument  is  an  assignment 

1283.  (111.)  A  draft  on  a  Minnesota 
bank,  payable  to  Henry  Brown,  was  indorsed 
by  Brown  to  an  Illinois  bank,  a  holder  in  due 
course.  Before  the  check  was  presented,  pay- 
ment was  stopped.  Opinion:  In  Minnesota, 
where  a  check  is  an  assignment,  the  drawer 
cannot  countermand  payment  when  in  the 
hands  of  a  bona  fide  holder  and  the  latter  has 
a  right  of  action  against  tlie  drawee  bank 
which  refuses  payment,  when  in  funds,  be- 
cause of  stop  order.  Vol.  5,  p.  372,  Dec, 
1912. 

NoTK:  The  Xpj;otial)le  In^trunionts  Act  passed 
ill  Miniiosota  in  .April.  l!»l.{.  iias  chnnpod  this 
riilo  liy  providing;  tliat  tin*  jjivinp  of  a  clipck  doos 
not  opprate  as  an  assijjnnuMit  of  funds.  This  in 
effect  ijivcs  the  drawer  the  riglit  of  stop  payment. 

1284.  (S.  C.)  Under  the  law  of  South 
Carolina.  (dilTering  from  the  large  majority 


157 


128^ 


Dir;T':sT  of  lec.al  optxioxs 


of  states),  the  drawer  of  a  clieek  li.is  no  riglit 
to  stop  payment  of  his  check,  unless  perhaps 
it  was  obtained  from  him  by  fraud  and  is 
still  in  the  hands  of  the  payee,  but  if  the 
c-lieck  has  Iteen  neij;otiated  to  a  bona  fide 
liolder,  tlic  rigiit  to  countermand  would  be 
lost.     Vol.  2,  p.  415,  April,  ]J)10. 

NoTK:  Tlu>  Nof^'otialilo  Tiistninitnts  Act  iia-^Hcd 
in  Soutli  Carolina  in  iMaroli,  1914,  lias  clianpcd 
this  rule  liy  proviilinji  that  the  givinir  of  a  check 
does  not  o|)erate  as  an  assij^ninent  of  funds.  This 
in  etrect  {^ives  the  drawer  tlie  ri<i;ht  of  stop  pay- 
ment. 

1285.  (S.  Dak.)  In  South  Dakota,  con- 
trary to  the  rule  in  most  of  the  states,  a  check 
is  an  assignment  to  the  payee  which  binds  the 
bank  as  soon  as  presented  and,  as  a  conse- 
quence, the  drawer  cannot  countermand  pay- 
ment, though  he  may  withdraw  his  balance 
before  presentment  of  the  check.  Vol.  3,  p. 
336,  Dec,  1910. 

Note:  The  Negotiable  Instruments  Act  passed 
in  South  Dakota  in  February,  1913,  has  changed 
this  rule  by  providing  that  the  giving  of  a 
check  dcK's  not  operate  as  an  assignment  of  funds. 
This  in  effect  gives  the  drawer  the  right  of  stop 
payment. 

Where  instrument  is  not  an  assignment 

1286.  (111.)  A  drew  his  check  for  $100, 
payable  to  B,  who  indorsed  for  value  to  C, 
an  innocent  holder.  Before  C  presented  the 
check  A  ordered  the  bank  not  to  pay.  Opin- 
ion: In  Illinois  where  a  check  is  not  an  as- 
signment, the  drawer  may  countermand 
payment  of  a  check  and  the  holder  has  no 
right  of  action  against  the  bank  thereon,  but 
his  recourse  is  limited  to  the  drawer  and 
prior  parties.     Vol.  5,  p.  372,  Dec,  1912. 


1287.  (111.)  The  former  law  in  Illinois 
has  been  changed  by  the  Negotiable  Instru- 
ments Law,  providing  that  the  giving  of  a 
check  does  not  operate  to  assign  the  deposit. 
The  drawer  now  has  the  right  to  stop  pay- 
ment, and  the  bank  is  under  no  liability  to 
the  holder  for  refusing  payment,  f)ursuant 
to  the  stop  order.     Vol.  2,  pj  481,  May,  1910. 

1288.  (Mass.)  .\  l)earer  check  not  being 
an  as.signmoiit,  but  merely  an  order  and  au- 
thority to  tlie  bank  to  pay,  the  drawer  has 
riglit  lo  stop  piiyment  e(jually  as  in  case  of  a 
check  parable  to  order.  Vol.  7,  p.  106,  Aug., 
1914. 

1289.  (Tex.)  A  check  hears  the  follow- 
ing notation,  "given  as  earnest  money  on  land 
trade."  The  bank  questions  its  right  to  pay 
the  instrument  without  first  inquiring  as  to 
the  status  of  the  land  trade,  also  the  right 
of  the  drawer  to  stop  payment.  Opinion: 
The  check  would  be  construed  as  an  uncon- 
ditional order  to  pay,  the  notation  being  a 
mere  statement  of  the  consideration  for  which 
the  check  was  given.  If  the  check  operated 
to  assign  the  fund  in  the  bank,  as  soon  as 
delivered,  the  drawer  would  have  no  right  of 
countermand,  but  if  it  was  a  mere  order  on 
an  authority  to  the  bank  to  pay  and  did 
not  have  the  legal  effect  of  assignment,  the 
drawer  would  have  the  right  to  stop  payment. 
According  to  the  weight  of  authority  in 
Texas,  a  check  does  not  operate  as  an  assign- 
ment.    Vol.  9,  p.  496,  Dec,  1916. 

Note:  The  Negotiable  Instruments  Law  pro- 
viding that  a  clieck  does  not  operate  as  an  as- 
signment was  parsed  in  Texas  in  March,  1919. 


TAXATION 


Canadian  bank  notes  and  currency 

1290.  (Idaho.)  Bank  which  pays  out  in 
the  United  States  Canadian  bank  notes  which 
have  been  received  by  it,  must  pay  tax  of  ten 
per  cent,  on  all  notes  so  paid  out.  Vol.  3,  p. 
402,  Jan.,  1911. 

1291.  (N.  Dak.)  A  bank  in  the  United 
States  which  pays  out  over  its  counter  Can- 
adian bank  notes  which  it  has  received  on  de- 
posit is  subject  to  the  Federal  tax  of  10  per 
cent,  on  all  notes  so  paid  out,  but  a  bank  in 
the  United  States  may  receive  Canadian  bank 
notes  on  deposit  and  send  them  to  Canada 
for  redemption  without  being  required  to  pay 
tax  thereon.     Vol.  3,  p.  145,'  Sept.,  1910. 

1292.  (Wash.)  A  national  or  state  bank 
which  receives  on  deposit  and  pays  out  Can- 


adian currency  is  liable  to  the  10  per  cent, 
tax  thereon  under  U.  S.  Eev.  Stat.,  Sec.  3412, 
but  a  bank  may  receive  on  deposit  and  send 
such  currency  to  Canada  for  redemption 
without  being  required  to  pay  tax  thereon. 
Vol.  11,  p.  167;  Sept.,  1918. 

Corporation  tax  law 

1293.  (Kan.)  The  Corporation  Tax 
Law  passed  by  Congress  on  August  5,  1909, 
providing  for  a  tax  on  incomes  for  the  year 
1909,  is  enforceable  and  does  not  come  within 
the  definition  of  ex  post  facto  laws.  Vol.  2, 
p.  335,  Feb.,  1910. 

1294.  (Ohio.)  A  bank  in  making  its 
corporation  tax  return  under  the  Federal  Ex- 
cise Tax  Law  of  August  5,  1909,  deducted 
from  its  gross  income  the  amount  paid  by  it 


I5S 


TAXATION 


1302 


for  the  state,  county  and  municipal  taxes  as- 
sessed against  its  sliareholders.  The  Commis- 
sioner of  Internal  Kevenue  contended  that 
such  taxes  paid  by  tlie  bank  on  its  own  stock 
were  chargeable  to  the  individual  stockhokler 
and  are  not  proper  deductions  from  gross  in- 
come authorized  by  the  law.  Opinion:  The 
deduction  was  not  authorized  where  the  tax 
sought  to  be  deducted  is  levied  against  the 
shareholder  and  the  bank  pays  the  tax  for  the 
shareholder.     Vol.  3,  p.  519,  March,  1911. 

1295.  (Pa.)  It  is  very  questionable 
under  the  Corporation  Tax  Law  whether  a  na- 
tional bank  can  deduct  from  gross  income  the 
depreciation  in  premium  on  United  States 
bonds  when  the  depreciation  is  not  evidenced 
by  the  books,  the  premium  being  still  carried 
as  an  asset.     Vol.  2,  p.  335,  Feb.,  1910. 

Deduction  of  government  bonds 
Soe  132.3 

1296.  (Ky.)  Government  bonds  owned 
by  a  national  bank,  whether  held  for  circula- 
tion or  for  investment,  cannot  be  deducted 
from  the  taxable  value  of  the  sTiares,  A  de- 
cision in  Kentucky  holds  tliat  the  Kentucky 
tax  law  of  1906  imposes  a  tax  upon  national 
bank  shares  which  is  payable  by  the  bank  and 
collectible  from  the  shareholders  and  not  upon 
the  capital  of  the  bank,  and  that  the  value 
of  United  States  bonds  owned  by  the  bank 
cannot  be  deducted  from  the  assessment. 
The  court  makes  no  distinction  between  bonds 
used  as  a  basis  for  circulation  and  bonds  held 
as  a  pure  investment.  Vol.  1,  p.  62,  Aug., 
1908. 

Deduction  of  real  estate 

1297.  (Mass.)  In  ]\Iassachusetts  the  law 
provides  that  bank  shares  shall  be  assessed  to 
the  owner  in  the  city  or  town  in  which  the 
bank  is  located  and  not  elsewhere,  in  the  as- 
sessment of  state,  county  and  town  taxes, 
whether  such  owner  is  a  resident  of  such  city 
or  town  or  not.  They  shall  be  assessed  at 
their  fair  cash  value  on  the  first  day  of  May, 
first  deducting  therefrom  the  ])roportionate 
part  of  the  value  of  the  real  estate  belonging 
to  the  bank,  at  the  same  rate  as  other  moneyed 
capital  in  the  hands  of  individuals  is  by  law 
assessed.  The  banks  pay  the  tax  and  have  a 
lien  on  the  shares  for  reimbursement.  A"ol. 
l,p.  170,  Nov.,  1908. 

1298.  (Mont.)  A  bank  does  not  hold 
title  to  real  estate,  but  holds  title  to  one-half 
the  sliares  of  a  corporation  which  owns  the 
building  in  which  the  bank  is  located.     The 


Montana  statute  on  taxation  of  banks  pro- 
vides that  the  value  of  the  real  estate  to  which 
the  bank  holds  title  shall  be  deducted  from 
the  total  value  of  the  bank  shares  and  the  real 
estate  assessed  to  the  bank.  Opinion:  The 
statute  does  not  authorize  deduction  of  the 
value  of  the  bank's  holding  of  stock  of  the 
company  which  owns  the  bank  building.  Vol. 
8,  p.  251,  Sept.,  1915. 

1299.  (N.  Y.)  Banks  in  New  York 
must  pay  tax,  assessed  against  the  share- 
holders, at  the  rate  of  1  per  cent,  of  the  tax- 
able value  of  the  shares  and  in  arriving  at 
such  taxable  value  the  value  of  real  estate 
owned  by  the  bank  cannot  be  deducted,  nor 
can  the  bank  deduct  the  value  of  real  estate 
mortgages  owned  by  it  upon  which  mortgage 
tax  has  been  paid  nor  the  value  of  govern- 
ment, state  or  village  bonds  owned  by  the 
bank.     Vol.  11,  p.  214,  Oct.,  1918. 

1300.  (N.  Y.)     A  bank  pays  a  state  tax 

of  1  per  cent,  on  its  capital  stock,  surplus  and 
undivided  profits.  It  is  also  assessed  for 
local  and  state  taxes  on  its  building  which  is 
part  of  its  capital  and  surplus.  The  bank 
objects  to  the  assessment  on  the  ground  of 
double  taxation  of  its  real  estate.  Opinion: 
The  bank  must  pay  taxes  on  its  real  estate, 
notwithstanding  such  real  estate  is  included 
in  the  value  of  its  shares  upon  which  1  per 
cent,  tax  is  levied.     Vol.  7,  p.  220,  Oct:,  1914. 

Deduction  of  taxes 

1301.  (Idaho.)  A  bank  in  Idaho  de- 
ducted from  its  return  of  income  to  the  Com- 
missioner of  Internal  Revenue,  under  the  Cor- 
poration Tax  Act  of  1909,  the  state  taxes 
which  were  paid  on  its  shares  for  the  years 
1909,  1910,  1911.  1912  and  1913.  In 'l914 
the  Commissioner  claimed  that  such  taxes 
should  not  have  been  deducted  and  amended 
tl)e  return,  requiring  the  bank  to  pay  an  ad- 
ditional tax  on  such  amounts.  Opinion: 
The  Federal  decisions  hold  that  such  state 
taxes  paid  on  shares  of  stock  cannot  be  de- 
ducted from  gross  income  and  the  additional 
tax  on  such  amounts  deducted  in  previous 
vears  should  be  paid  on  the  amended  return. 
Vol.  6,  p.  822,  June.  1914. 

1302.  (N.  C.)  T'ndcr  a  North  Carolina 
statute,  a  tax  is  assessed  against  the  value  of 
shares  in  national  banks  for  school,  county 
and  municipal  purjioscs  to  be  paid  by  the 
bank  and  dedmted  from  dividends.  A  bank 
questions  the  right  of  the  state  to  collect  from 
it  taxes  assessed  agaiiist  certain  of  its  stock- 
holders, resident  in  Alabama,  where  it  asserts, 


159 


i3o;i 


DIGEST  OF  LEGAL  OPIXIOXS 


such  stockholders  nro  also  rompollod  to  list 
and  j)ay  taxes  on  such  shares  under  the  laws 
of  Alai)ania.  Opinion:  Under  the  National 
Bank  Act  shares  of  non-residents  must  be 
taxed  in  the  place  where  tiie  hank  is  located 
and  "not  elsewhere."  It  would,  therefore, 
he  unlawful  to  tax  such  shares  in  Alabama 
and  there  would  be  no  double  taxation.  It  is 
lawful  for  a  state  to  require  a  national  bank 
to  collect  the  tax  out  of  the  shareholder's 
dividends  and  pav  it  as  his  agent.  Vol.  2, 
p.  374,  March,  1910. 

1303.  (Tenn.)  A  hank  in  Tennessee  in 
making  its  return  under  the  United  States 
Income  Tax  Law,  deducted  as  expenses  from 
its  gross  income  the  taxes  assessed  against  its 
shareholders,  but  ]iaid  by  the  bank  to  the 
state.  A  provision  of  said  law  allows  a  cor- 
poration to  deduct  from  the  gross  income  "all 
sums  paid  by  it  within  the  year  for  taxes  im- 
posed." The  department  of  Internal  Eev- 
enue  claimed  that  such  deduction  was  not 
lawful.  Opinion:  Where  taxes  are  assessed 
against  bank  stockholders  as  upon  their  prop- 
erty, though  paid  by  the  bank,  the  Federal 
courts  hold  tlie  bank  cannot  deduct  the  taxes 
so  paid  from  its  gross  income,  such  taxes  not 
being  assessed  against  the  corporation  or 
its  property.     Vol.  7,  p.  774,  April,  1915. 

Discrimination  in  assessment 

1304.  (Miss.)  A  bank  complains 
against  discrimination  of  the  state  in  taxing 
national  bank  stock  on  full  book  value,  w^hile 
real  estate  and  other  kinds  of  property  are 
taxed  only  on  a  small  percentage  of  actual 
value.  Opinion:  The  taxation  of  national 
bank  shares  at  a  higher  rate  than  moneyed 
capital  invested  in  real  estate,  stock  and  other 
kinds  of  property,  has  been  held  not  a  viola- 
tion of  the  anti-discrimination  provision  of 
Section  529,  U.  S.  Eevised  Statutes,  where 
the  "moneyed  capital"  so  under-taxed  is  not 
used  in  competition  with  that  of  national 
banks.     Vol.  9,  p.  909,  May,  1917. 

1305.  (Okla.)  In  some  parts  of  the 
state  of  Oklahoma,  national  bank  shares  are 
assessed  for  purposes  of  taxation  at  full  val- 
uation of  100  per  cent.,  while  in  other  parts 
of  the  state,  shares  of  state  and  national 
banks  are  assessed  at  only  65  per  cent,  of 
their  actual  value.  A  national  bank  assessed 
at  full  value  claimed  that  it  has  been  dis- 
criminated against  and  demands  relief. 
Opinion:  In  order  to  get  relief  from  such 
discrimination  the  national  bank  would  have 
to  prove  at  least  three  things — (1)  that  the 


under-valued  capital  in  one  part  of  the  state 
is  in  comi)etition  with  the  fully  valued  na- 
tional bank  shares  in  another  part;  (2)  that 
sucii  undervaluation  constitutes  a  discrimina- 
tion in  the  proportionate  amout  of  taxes  lev- 
ied for  state  purposes,  as  distinguished  from 
county  and  city  purposes;  and  (3)  that  such 
discrimination  is  systematic  and  intentional, 
and  not  merely  desultory  and  accidental. 
Vol.  3,  p.  582,  April,  1911. 

Erroneous  return 

1306.  (Tenn.)  Under  the  Corporation 
Excise  Tax  Law  of  1909  and  the  Income  Tax 
Law  of  1913,  where  there  is  an  erroneous  re- 
turn, discovery  of  the  error  must  be  made  by 
the  Commissioner  of  Internal  Eevenue  with- 
in three  vears  from  the  time  the  return  is  due. 
Vol.  7,  p.  775,  April,  1915. 

Federal  income  tax  law 

1307.  (Porto  Rico.)  The  Federal  In- 
come Tax  Law,  approved  September  8,  1916, 
is  not  unconstitutional  because  it  imposes  a 
tax  of  2  per  cent,  upon  incomes  received  dur- 
ing 1916,  prior  to  the  enactment  of  the  law. 
Vol.  9,  p.  658,  Feb.,  1917. 

Tax  for  fraction  of  year 

1308.  (N.  Dak.)  The  stockholders  of  a 
state  bank  organized  after  April  1  are  not 
liable  to  taxation  for  the  current  year,  accord- 
ing to  a  statute  passed  in  North  Dakota  in 
1913.     Vol.  9,  p.  749,  March,  1917. 

Occupation  tax 
See  1321 

1309.  (Idaho.)  A  national  bank  cannot 
be  forced  to  pay  an  occupation  tax  imposed 
by  the  state.  It  has  been  repeatedly  held  that 
a  state  has  no  power  to  tax  national  banks 
except  as  Congress  permits,  and  Congress  has 
not  authorized  any  taxation  of  national  banks 
by  the  states,  except  as  to  real  estate,  but  only 
a  taxation  upon  the  shares  of  national  banks 
to  the  individual  shareholders,  subject  to  cer- 
tain restrictions.     Vol.  1,  p.  169,  Xov.,  1908. 

1310.  (Okla.)  States  or  municipalities 
have  no  power  to  impose  special  or  occupa- 
tion taxes  upon  national  banks.  Vol.  3,  p. 
468,  Feb.,  1911. 

Taxation  of  choses  in  action 

1311.  (Okla.)  Oklahoma  session  law 
passed  in  1917  providing  for  payment  of  a 
tax  on  bonds,  notes  and  choses  in  action  and 


160 


TAXATION 


1320 


excluding  from  the  courts  all  such  instru- 
ments not  registered  and  upon  which  the  tax 
is  not  paid  in  accordance  with  the  Act,  lias  for 
its  underlying  purpose  the  taxation  of  a  class 
of  intangible  personal  property  which  would 
otherwise  escape  taxation,  Kegistration  is 
compulsory.  It  does  not  provide  for  double 
taxation  of  banks  holding  such  bonds,  notes 
or  choses  in  action.  A  similar  law  exists  in 
Connecticut,  and  there  is  a  general  movement 
among  the  states  to  provide  methods  by  which 
a  larger  share  of  personal  property  is  subject 
to  taxation.     Vol.  10,  p.  44,  July,  1917. 

Penalty  for  delayed  return 

1312.  (Miss.)  A  bank  mailed  its  cor- 
poration tax  return  to  the  Collector  of  Inter- 
nal Ee venue  on  March  1st.  The  same  was 
not  received  by  the  collector  until  a  day  late 
and  a  penalty  of  fifty  per  cent  was  imposed. 
Opinion:  That  the  return  was  made  on 
March  1st  by  placing  it  in  the  post-office  at 
that  time.  The  safest  course  is  for  the  bank 
to  pay  the  tax,  plus  the  penalty,  under  pro- 
test and  to  request  of  the  Commissioner  of 
Internal  Revenue  that  the  penalty  be  re- 
mitted, because  the  facts  do  not  warrant  the 
imposition  of  such  a  heavv  penaltv.  Vol.  3, 
p.  10,  July,  1910. 

1313.  (Okla.)  A  bank  made  its  annual 
return  for  the  Federal  corporation  tax  before 
March  1,  1911,  but  through  an  error  of  its 
mailing  clerk,  made  unintentionally,  the  re- 
turn did  not  reach  the  collector  until  March 
4,  1911.  The  law  requires  a  return  to  be 
made  on  or  before  March  1st  and  in  case  of 
"refusal  or  neglect"  autliorizes  a  penalty  of 
fifty  per  cent,  additional.  The  collector  in- 
sists on  collecting  a  substantial  penalty. 
Opinion:  There  being  no  wilful  neglect  by 
the  bank,  a  fifty  per  cent,  penalty  seems  un- 
just and  should  be  remitted.  The  proper 
course  is  to  write  the  Commissioner  of  Inter- 
nal Revenue  at  Washington  imless  a  compro- 
mise is  made  with  the  collector.  Vol.  4,  p. 
152,  Sept.,  1911. 

Savings  deposits  not  exempted 

1314.  (N.  Y.)  Opinion  that  savings  de- 
posit in  interest  department  of  national  bank 
not  exempted  from  taxation  by  provision  of 
tax  law  of  New  York  exempting  "the  de- 
posits in  anv  bank  for  savings  which  are  due 
depositors.""    Vol.  7,  p.  100,  Aug.,  1914. 

1315.  (Pa.)  The  statutes  of  Pennsyl- 
vania do  not  exempt  savings  deposits  from 
taxation  and  such  deposits  are  subject  to  the 


four  mill  tax  for  state  purposes  as  part  of  the 
personal  property  of  the  depositor  under  the 
Act  of  ilav  11,  1911.  Vol.  9,  p.  910,  May, 
1917. 

Secured  Debts  Tax  Law  of  New  York 

1316.  (N.  Y.)  The  question  is  raised 
whether  national  and  state  banks,  because  of 
the  1  per  cent,  tax  on  bank  shares  in  lieu  of 
all  other  taxation,  except  real  estate  taxed 
directly  to  the  bank,  do  or  do  not  come  mulor 
the  provisions  of  the  newly  enacted  Secured 
Debts  Tax  Law  of  New  York  because  of  se- 
cured debts  owned  by  tlie  bank ;  and  wliether 
there  is  any  ditrerence  in  the  status  of  nation- 
al and  state  banks  in  this  regard.  Opinion: 
A  national  or  stflte  bank  owning  secured  debts 
is  not  taxable  under  the  Secured  Debts  Tax 
Law,  the  latter  because  exempted  from  all 
taxation  on  personal  property  by  Section  24 
of  the  Tax  Law,  in  view  of  the  tax  on  shares, 
and  the  former  class  of  banks  for  the  addi- 
tional reason  that  the  stiite  cannot,  in  any 
event,  tax  a  national  bank  upon  its  personal 
property.     Vol.  8,  p.  417,  Nov.,  1915. 

Stamp  tax 

1317.  (Ark.)  A  note  was  made  and 
dated  prior  to  December  1,  1914,  but  nego- 
tiated to  the  payee  bank  on  or  after  that  date. 
The  Federal  Act  of  October  22,  1914,  pro- 
vides among  other  things  for  a  stamp  tax  on 
promissory  notes  to  be  levied  on  and  after 
December  1,  1914.  Opinion:  The  promis- 
sory note  required  a  stamp  to  be  cancelled  as 
of  the  date  of  deliverv  to  the  bank.  Vol.  7, 
p.  494,  Jan.,  1915. 

1318.  (Md.)  Under  the  War  Revenue 
Act  of  1914,  a  stamp  tax  of  $2  per  $100  is 
placed  on  a  promissory  note  and  there  is  no 
tax  on  the  mortgage  securing  said  note.  Vol. 
7,  p.  380,  Dec,  1914. 

1319.  (Minn.)  All  promissory  notes, 
including  demand  notes,  are  subject  to  stamp 
tax  of  2  cents  for  $100  or  fraction  tlioroof, 
except  that  promissory  notes  issued  on  or 
after  April  0,  1918,  secured  by  United  States 
bonds  and  obligations  issued  after  April  2-1, 
l!n7,  are  exempt  from  stamp  tax.  Vol.  11, 
p.  392,  Jan.,  lit  19. 

1320.  (N.  J.)  A  transferred  shans  of 
stock  to  I^  with  a  10  cent  Internal  Revenue 
stamp  aflixed.  A  new  certificate  was  isniird 
to  V>  and  the  old  certificate  was  cancelled. 
The  question  was  raised  whether  or  not  tlie 
new  certificate  required  a  10  cent  stamp. 
Opinion:  Under  a   ruling  by  the   Conimis- 


101 


1321 


DIOEST  OF  LEGAL  OPINION'S 


sioiior  of  Intornal  Rovcnuo,  no  stamp  is  re- 
quired on  the  n(>\v  certificate.  Vol.  7,  p. 
4!)r),  Jan.,  IDIT). 

State  taxation  of  national  banks 

S(M'  i;;()i,  i.'fo,") 

1321.  (Cal.)  A  state  or  city  has  no 
power  to  inii)osc  a  license  or  privilege  tax 
upon  the  national  hanks.  Vol.  7,  p.  304, 
Nov.,  1!)1  !.     See  1309,  1310. 

1322.  (Mo.)  Income  Tax  Law  of  Mis- 
souri imposing  one-half  of  1  per  cent,  tax 
upon  net  incomes  of  individuals  and  corpor- 
ations is  inapplicable  to  national  banks  and 
not  enforceable  against  such  institutions,  as 
the  states  cannot  tax  national  banks  except 
as  Congress  permits  and  Section  5219,  U.  S. 
Eev.  Stat.,  which  is  the  measure  of  permis- 
sion by  Congress,  does  not  authorize  such  a 
tax.     Vol.  11,  p.  410,  Feb.,  1919. 

1323.  (N.  C.)  An  incorporated  town  in 
North  Carolina  lias  the  right  to  assess  for 
town  purposes  the  stock  of  national  bank 
shareholders  owned  by  non-residents  of  the 
state  and  to  require  the  bank  to  pay  the  taxes 
so  assessed.     Vol.  9,  p.  503,  Dec,  1916. 

1324.  (Okla.)  A  county  tax  assessor 
sought  to  compel  a  national  bank  officer  to 
furnish  a  list  of  the  names  of  shareholders 
and  the  number  of  shares  held  by  each. 
Opinion:  Under  the  Oklahoma  statute,  the 
county  assessor  had  the  right  to  compel  the 
bank  officer  to  furnish  the  list.  The  Supreme 
Court  of  the  United  States  has  upheld  such 


right  in  a  state  official,  acting  pursuant  to 
state  law.  It  lias  been  held  that  national 
banks  are  subject  to  state  legislation,  except 
where  such  legislation  is  in  conflict  with 
some  act  of  Congress  or  where  it  tends  to 
impair  or  destroy  the  utility  of  such  banks 
as  agents  or  instrumentalities  of  the  United 
States,  or  interferes  with  the  purpose  of  their 
creation.  Vol.  9,  p.  140,  Aug.,  191(5.  See 
S7'?. 

1325.  (S.  C.)  It  would  seem  that  a 
state  has  a  right,  in  providing  for  the  taxation 
of  national  bank  shares,  to  permit  the  owner 
to  deduct  the  value  of  non-taxable  state  bonds 
owned  by  the  bank,  although  denying  to  the 
shareholder  the  right  to  deduct  the  value  of 
non-taxable  United  States  Government  bonds 
so  owned,  the  refu.-al  to  permit  such  deduc- 
tion in  the  latter  case  being  upheld  by  the 
Supreme  Court  of  the  L'nited  States.  Vol. 
9,  p.  410,  Nov.,  1916. 

Transfer  tax  of  decedent 

1326.  (N.  J.)  A  deposit  of  a  non-resi- 
dent decedent  in  a  New  York  Savings  bank 
is  subject  to  the  Transfer  Tax.  The  same 
rule  applies  to  similar  deposits  in  a  Trust 
Company.     Vol.  3,  p.  675,  May,  1911. 

Treasury  notes  subject  to  taxation 

1327.  (N.  C.)  United  Slates  Treasury 
notes  are  subject  to  state  taxation  as  money 
on  hand  or  on  deposit.  Vol.  7,  p.  898,  Mav, 
1915. 


TRADE  ACCEPTANCES 


Acceptance  payable  at  bank  in  another 
locality 

1328.  (N.  Y.)  In  view  of  the  rule  of 
law  that  an  acceptance  made  payable  at  an- 
other place  varies  the  terms  of  the  bill  as 
drawn  and  discharges  non-consenting  parties, 
it  has  been  thouglit  desirable  to  have  inserted 
in  the  instrument  a  clause  protecting  the 
holder.  Opinion:  The  following  clause  is 
suggested :  "The  drawee  may  accept  this  bill, 
payal)le  at  any  bank,  banker  or  trust  company 
in  the  United  States  which  he  may  desig- 
nate." This  clause  will  operate  to  hold  the 
drawer  and  indorsers  liable  to  the  holder  who 
takes  an  acceptance  pavable  at  a  bank  in  an- 
other state.     Vol.  10.  p.  461,  Dec,  1917. 

Completing  signature  of  drawer  after 
acceptance 

1329.  (N.  Y.)  It  has  been  the  custom 
among  merchants  to  send  out  trade  accep- 


tances with  only  a  printed  signature  of  the 
drawer,  as  for  example  "'Smith  Manufactur- 
ing Company,"  underneath  which  is  a  blank 
line  starting  with  the  word  "By."  After  the 
acceptor  has  signed  and  mailed  the  instru- 
ment back  to  the  drawer  there  is  added  in 
pen  and  ink  after  the  word  "By"  the  words 
"John  Smith,  Treasurer."  The  purpose  of 
the  foregoing  is  to  protect  the  instrument 
should  it  be  lost  in  the  mail  or  otherwise  fall 
into  improper  hands.  The  question  is  raised 
whether  there  has  been  a  material  alteration 
which  would  entitle  the  acceptor  to  repudiate 
his  obligation.  Opinion:  The  completion  of 
the  drawer's  signature  after  the  instrument 
has  been  returned,  accepted,  would  not  be  a 
material  alteration  within  the  meaning  of  the 
law.  There  is  no  change  in  the  number  or 
relations  of  the  parties  and  no  change  in  the 
legal  effect  of  the  instrument  and  further- 
more, the  execution  of  the  instrument  by  the 


162 


TRADE  ACCEPTAXCES 


1335 


acceptor,  with  the  blank  unfilled,  would  con- 
stitute an  implied  authority  to  the  drawer  to 
fill  in  the  blank  with  his  completed  signature 
upon  return  of  the  instrument  to  him.  Vol. 
10,  p.  526,  Jan.,"l918. 

Effect  of  mechanic's  lien  rights 

1330.  (N.  Y.)  The  question  has  arisen 
as  to  the  status  of  the  material  man  who  takes 
a  trade  acceptance  to  cover  shipment  made 
to  a  contractor  for  use  in  construction  work. 
Does  he  thereby  lose  any  mechanic's  lien  right 
which  he  would  have  had  under  the  open 
book  accoiuit  system?  Does  he  become  a 
money  creditor  in  place  of  a  creditor  for  ma- 
terial? Opinion:  The  material  man  who 
takes  a  trade  acceptance  for  material  supplied 
does  not  thereby  lose  mechanic's  lien  right 
which  he  otherwise  might  have.  The  right 
to  enforce  the  lien  would,  however,  be  sus- 
pended until  maturity  of  the  acceptance  and 
a  pre-reqnisite  to  sucli  right  of  enforcement 
would  be  a  tender  of  the  return  of  the  trade 
acceptance  as  a  condition  precedent.  If  he 
has  negotiated  same  and  cannot  return  it,  the 
mechanic's  lien  ri^ht  would  not  be  enforce- 
able.    Vol.  10,  p.  591,  Feb.,  1918. 

Negotiability 

1331.  (Cal.)  When  a  trade  acceptance  is 
not  paid  when  due,  the  acceptor  is  liable  for 
the  principal  and  interest.  The  drawer  is 
also  lial)le,  provided  the  necessary  steps  upon 
dishonor  are  taken.  Under  the  provisions  of 
the  California  statute  a  trade  acceptance  is  a 
negotiable  instrument.  Vol.  9,  p.  501,  Dec, 
1916. 

1332.  (111.)  A  firm  in  Chicago  has  pre- 
pared a  form  of  trade  acceptance,  using  the 
standard  form,  but  changing  it  to  read:  "Ac- 
cepted (date.)  Payable  at  (designated  bank 
or  trust  company)  with  Chicago  or  New 
York  exchange."  A  bank  desires  to  know 
whether  the  addition  of  the  words  "with  Chi- 
cago or  Xew  York  exchange''  will  destroy  the 
negotiability  of  the  acceptance.  Opinion: 
The  insertion  of  the  words  will  not  affect  ne- 
gotiability. The  Negotiable  Instruments 
Act  expressly  provides :  "Sec.  2.  The  sum 
payable  is  a  sum  certain  within  the  meaning 
of  the  act,  although  it  is  to  be  paid  x  x  x 
4,  with  exchange,  whether  at  a  fixed  rate  or 
at  the  current  rate  x  x  x  ."  Vol.  11, 
p.  39,  July,  1918. 

1333.  (Minn.)  A  business  house  uses 
the  regular  form  of  trade  acceptance  and 
prints  on  the  face  of  the  acceptance  the  fol- 


lowing words:  "5  per  cent,  discount  will  be 
allowed  if  this  acceptance  is  taken  up  within 
thirty  days  from  date."  The  business  house 
holds  the  acceptance  until  the  thirty-day 
period  has  expired.  If  the  buyer  sends  them 
the  money  they  allow  him  5  per  cent,  dis- 
count, cancel  the  trade  acceptance  and  return 
it  to  him.  If  lie  does  not  pay  in  thirty  days 
they  offer  the  trade  acceptance  to  the  bank 
for  discount.  At  the  time  the  acceptance  is 
thus  offered,  the  discount  clause  means  noth- 
ing, for  the  discount  period  has  expire<l.  The 
bank,  however,  desires  to  be  sure  that  the  ne- 
gotiability of  the  acceptance  has  not  been  de- 
stroyed by  the  added  words.  Opxnvm:  A 
Minnesota  case  holds  that  a  provision  of  this 
character  does  not  affect  negotial)ility.  it 
being  stated  that  it  did  not  make  the  instru- 
ment uncertain  as  to  amount.  On  the  other 
hand  a  decision  in  North  Dakota  holds  that 
such  a  provision  renders  an  instrument  non- 
negotiable.  Although  the  courts  take  differ- 
ent views  on  the  proposition,  the  ^linnesota 
court  seems  to  hold  the  better  view.  Vol.  11, 
p.  39.  July,  1918. 

Trade  acceptance  propaganda  not  in  re- 
straint of  trade 

1334.  (N.  Y.)  Various  trade  associa- 
tions have  adopted  or  are  about  to  adopt  res- 
olutions recommending  to  their  members,  in 
effect,  that  trade  acceptances  be  substituted 
for  open  accounts  and  that  uniform  terms  of 
credit  based  upon  trade  acceptances  be 
adopted.  The  question  is  asked  wiiether  co- 
operation along  the  lines  covered  by  the  reso- 
lutions is  in  contravention  of  the  Sherman 
Anti-Trust  Law.  Opinion:  Sec.  1,  Act  July 
2,  1890,  provides  that  "Every  contract,  com- 
bination in  the  form  of  trust  or  otherwise,  or 
conspiracy  in  restrain  of  trade  or  commerce 
among  the  several  states,  or  with  foreign  na- 
tions, is  hereby  declared  to  be  illegal.  Every 
person  who  shall  make  any  such  contract  or 
engage  in  any  such  combination  or  conspir- 
acy, shall  be  deemed  guilty  of  a  misdemean- 
or,''etc.  No  violation  of  the  foregoing  would 
result.  Tiie  action  contemplated  by  the  trade 
associations  would  tend  to  promote  rather 
than  restrain  interstate  trade.  It,  of  course, 
is  not  contemplated  that  members  or  others 
not  adojning  the  scheme  should  be  boycotted 
and  refused  all  manner  of  credit,  which  would 
present  a  ditfi^rent  situation.  Vol.  10,  p. 
375,  Nov.,  19 ir. 

Overdue  trade  acceptance  payable  at  bank 

1335.  (N.  Y.)  A  makes  his  trade  ac- 
ceptance payable  at  a  bank  and  at  maturity 


163 


1336 


DIGEST  OF  LEGAL  OPINIONS 


makes  payment  to  tlic  holder  but  allows  the 
latter  to  retain  the  acccptimce.  The  holder 
in  defraud  of  A,  presents  the  acceptance  to 
the  hank  after  maturity  and  receives  payment 
and  it  is  ehiir^a'd  to  A's  account.  Should  the 
bank  reciuire  an  express  instruction  from  the 
maker  before  niakiiifj  payment?  Opinion: 
The  safest  course  for  the  bank  is  to  obtain 
the  express  instruction  from  the  maker  before 
payment  of  the  trade  acceptance.  It  is  a 
serious  question,  still  undecided  by  the  courts, 
whether  the  authority  of  the  hank  to  pay  con- 
tinues after  maturity  and  whether  the  fact 
that  the  trade  acceptance  is  overdue  when 
presented  at  the  bank  is  not  sufTicient  to  put 
the  bank  upon  inquiry  of  the  acceptor  before 
making  pavment.  Vol.  10,  p.  849,  June, 
1918. 

1336.  (Wash.)  Wliere  n  nore  or  trade 
acceptance  maturing  at  a  fixed  or  determin- 
able future  time  is  made  payable  at  the 
maker's  bank  and  is  not  presented  for  pay- 
ment until  after  the  due  date,  opinions  differ 
as  to  the  authority  of  the  bank  to  pay  without 
express  instructions  from  its  customer.  An 
Australian  decision  that  the  bank's  authority 
to  pay  continues  after  maturity  until  counter- 
manded, is  not  regarded  as  controlling  in  this 
country.  The  precise  point  has  never  been 
decided  in  this  country.  It  would  be  desir- 
able to  pass  an  amendment  of  the  Negotiable 
Instruments  Law  which  would  provide  a  de- 
finite rule  on  this  point.  Such  an  amend- 
ment has  been  passed  in  Missouri  as  follows : 
"WTiere  the  instrument  is  made  payable  at  a 
bank  it  is  equivalent  to  an  order  to  the  bank 
to  pay  the  same  for  the  account  of  the  prin- 
cipal debtor  thereon,  but  where  the  instru- 
ment is  made  payable  at  a  fixed  or  determin- 
able future  time,  the  order  to  the  bank  is 
limited  to  the  date  of  maturity  only."  Or  it 
might  prove  more  advantageous  for  the 
amendment  to  provide  that  a  bank  may  pay 
overdue  acceptances  and  notes  within  a  rea- 
sonable time  after  maturitv.  Vol.  10,  p. 
711,  April,  1918. 

Payment  by  acceptor's  bank 

1337.  (N.  Y.)  The  question  has  arisen 
whether,  when  a  trade  acceptance  is  made 


payable  at  a  bank,  the  bank  has  the  right  to 
charge  the  amount  up  against  the  acceptor's 
account  upon  presentment  at  maturity,  with- 
out express  instructions  from  the  maker  of  the 
acceptance,  the  same  as  it  would  charge  up 
a  customer's  check  upon  payment.  Opinion: 
Section  87  of  the  Negotiable  Instruments  Act 
provides:  "Where  the  instrument  is  made 
payable  at  a  bank,  it  is  equivalent  to  an  order 
to  the  bank  to  pay  the  same  for  the  account 
of  the  principal  dclitor  thereon."  Under  this 
provision  the  bank  would  not  only  be  author- 
ized, but  it  would  be  its  duty,  where  the  ac- 
ceptor's funds  were  sufficient,  to  pay  the  ac- 
ceptance upon  presentment  at  maturity  with- 
out express  instructions  from  the  maker  to 
that  end.  In  Illinois,  Nebraska,  South  Da- 
kota, Kansas  and  Minnesota,  the  above  quoted 
section  has  been  either  omitted  or  repealed 
and  therefore  in  those  states  some  express 
instructions  from  the  customer  would  be 
necessary  before  the  bank  could  pay  his 
acceptance,  unless  the  bank  itself  owned  the 
acceptance,  in  which  case  it  would  be  charge- 
able to  the  customer's  account  bv  way  of  set 
off.     Vol.  10,  p.  461,  Dec,  1917. 

Seller's  right   of  replevin 

1338.  (N.  Y.)  The  seller  of  goods  re- 
ceiving a  trade  acceptance  asks  if  he  is  in  any 
worse  position  so  far  as  his  right  of  replevin 
goes  than  the  seller  of  goods  who  simply 
charges  the  purchase  price  to  the  purchaser  on 
an  open  account.  Opinion:  In  any  case 
where  goods  have  been  sold  and  delivered,  and 
an  action  of  replevin  would  lie  on  behalf  of 
the  seller  because  of  some  breach  of  contract 
or  fraud  entitling  him  to  annul  the  contract 
and  seize  the  goods  as  still  his  property,  the 
only  difference  between  the  position  of  the 
seller  who  takes  a  trade  acceptance  and  one 
who  has  charged  the  amount  in  open  ac- 
count, would  seem  to  be  this :  In  an  action  of 
replevin  where  a  trade  acceptance  has  been 
taken  and  the  seller  seeks  to  rescind  the  con- 
tract, a  pre-requisite  would  be  a  tender  of  the 
return  of  the  instrument  as  a  condition  pre- 
cedent to  the  right  of  recovery.  Vol.  10,  p. 
461,  Dec,  1917. 


1339. 


TRANSFER  OF  STOCK 

See  220,  236,  240,  241,  463,  464 


Book  transfers 
(Kan.)     The  owner  of  fifty  shares 


of  national  bank  stock  seeks  to  divide  the 
same  equally  among  his  five  children.     He 


assigns  each  certificate  in  blank,  leaving  them 
in  a  safe  deposit  box  to  be  delivered  upon  his 
death.  The  purpose  is  to  avoid  payment  of 
the  national  inheritance  tax.     Can  the  bank 


164 


TRANSFER  OF  STOCK 


1345 


legally  transfer  said  stock  without  making 
a  transfer  on  the  books?  Opinion:  A  valid 
gift  of  bank  stock  may  be  effected  by  delivery 
of  same  to  the  bank  to  be  delivered  to  the 
donee  upon  death  of  the  donor,  provided 
there  is  an  absolute  and  unequivocal  sur- 
render by  the  donor  of  dominion  over  the 
stock  and  it  is  clearly  indicated  that  the  bank 
is  constituted  trustee  of  the  donee  and  not 
mere  agent  of  the  donor.  Regarding  the 
bank  as  trustee,  the  necessity  of  transferring 
the  stock  on  the  books  could  possibly  be  dis- 
pensed with.  In  case  of  sale  of  bank  stock 
it  has  been  held  that  title  to  national  bank 
shares  is  transferred  by  delivery  of  the  cer- 
tificate with  power  of  attorney  indorsed  in 
blank,  without  the  necessity  of  transfer  on  the 
books  and  presumably  the  same  rule  would 
apply  to  a  gift  of  bank  stock.  Yol.  11,  p. 
41,  July,  1918. 

1340.  (N.  J.)  A  signed  a  transfer  and 
power  of  attorney  on  a  stock  certificate  and 
delivered  it  to  B  for  value.  Before  B  had 
the  stock  transferred  on  the  books  of  the  cor- 
poration, A  died.  Opinion:  A's  subsequent 
death  did  not  affect  B's  rights  to  a  transfer  on 
the  books.  In  a  case  where  A's  death  oc- 
curred before  the  delivery  of  the  certificate  to 
B,  it  is  doubtful  if  the  subsequent  delivery 
would  be  effectual.  Vol.  5,  p.  312,  Nov., 
1912. 


1341.  (N.  C.)  It  is  not  necessary,  under 
the  law  of  North  Carolina,  for  a  bank  holding 
shares  of  a  North  Carolina  corporation  as 
collateral  security  to  have  the  same  trans- 
ferred on  the  books  of  the  corporation. 
Transfer  on  the  books  is  not  necessary  to 
protect  the  stock  against  the  attacliing  cred- 
itors of  the  pledgor.  Vol.  1,  p.  2G8,  Jan., 
1909. 

1342.  (N.  Dak.)  A  bank  in  North  Da- 
kota loaned  money  ujKjn  a  pledge  of  stock  of 
a  corporation  in  Montana.  Being  unable  to 
collect  the  loan,  the  bank  requested  that  the 
stock  be  transferred  on  the  books  of  the  cor- 
poration and  a  new  certificate  issued  to  it  in 
exchange  for  the  original  one.  The  corpor- 
ation refused  the  request,  stating  that  at  a 
directors'  meeting  it  was  decided  to  cancel  the 
certificate  of  stock,  as  the  stockholder  had  not 
lived  up  to  his  agreement  witli  the  corpora- 
tion. Opinion :  The  hank  has  the  right,  upon 
the  default  of  the  pledgor,  to  have  the  stock 
transferred  upon  the  books  of  the  corporation 
and  a  new  certificate  is  issued  to  it,  upon  com- 
pliance with  the  statutory  requirements,  and 
the  corporation  is  estopped  from  alleging  the 
invalidity  of  the  stock  because  the  holder 
did  not  live  up  to  his  agreement  with  the  cor- 
poration.    Vol.  11,  p.  2T8,  Nov.,  1918. 


MISCELLANEOUS 


Attorney's  delay  in  bringing  suit 

1343.  (Fla.)  An  attorney  following  his 
client's  instructions,  sued  and  recovered 
judgment  from  A,  the  maker  of  a  note.  The 
judgment  against  A  was  worthless,  but  the 
amount  was  recoverable  from  two  bondsmen 
who  had  become  sureties  for  A.  Through 
the  attorney's  negligence  the  bondsmen  were 
not  sued  and  later  one  died  and  the  other 
became  a  bankrupt.  Opinion:  Where  attor- 
ney has  specific  instructions  to  proceed 
against  bondsmen,  or,  without  specific  in- 
structions, is  under  duty  to  take  necessary 
legal  steps  to  enforce  liability  and  negligently 
puts  off  bringing  suit  until  claim  against 
bondsmen  becomes  worthless,  he  becomes 
liable  to  client  for  damages  suffered.  Vol. 
6,  p.  214,  Sept.,  1913. 

Contract  to  pay  commission  on  sale 

1344.  (Ga.)  A  entered  into  a  written 
contract  with  a  real  estate  agency,  wherein 


the  agency  was  given  power  of  attorney  to 
sell  A's  house  for  $1,000  within  thirty  days, 
and  upon  cancellation  of  the  contract  by  A 
before  its  expiration  A  was  obliged  to  jiay 
the  agency  the  five  per  cent,  commission.  A 
cancelled  the  contract  and  the  agency  de- 
manded the  commission.  Opinion:  The 
agency  may  recover  the  commission,  because 
the  contract  was  founded  upon  sufficient  con- 
sideration. A  employed  the  agency  as  l)rok- 
ers  to  sell,  and  such  employment  was  sufficient 
consideration  to  support  A's  promise.  Vol. 
5,  p.  757,  May,  191.?. 

Right  to  change  name 

1345.  (Cal.)  .\  man  having  the  name 
"Badasci''  wanted  to  cliange  his  name  to 
"Badasche."  The  deeds  to  his  property,  his 
notes,  mortgages  and  insurance  policies  were 
executed  in  his  original  name.  The  question 
was  raised  by  a  liank  as  to  whether  it  was 
safe   in  accepting  such   instruments  as  col- 


1G5 


134G 


DIGEST  OF  LEGAL  OPINIONS 


latt'rnl  from  the  lioldcr  whoso  name  was 
cliaiiffod  without  court  order.  Opinion:  The 
man  has  a  common  hiw  ri<^ht  to  change  his 
name  without  court  order  but  in  transferring 
his  ])ro{)crty  and  contract  rights  there  may 
1)0  dilliculty  in  proving  identity  and  it  would 
be  more  desirable  to  obtain  a  court  order, 
making  tlic  change  a  matter  of  record  and 
})r(n)f,  unless  the  names  are  to  be  regarded  as 
idem  sonans,  wlicn  such  diificulty  of  proving 
identity  would  not  arise.  It  is  unsafe  for  a 
bank  to  accept  the  instrument  as  collateral 
because  of  the  difficulty  of  proof  of  identity 
which  could  be  obviated  by  a  court  order. 
Statutes  providing  for  a  change  of  name  by 
judicial  proceeding  do  not  affect,  but  are  in 
aid  of  the  common  law  right  l)y  affording  an 
easier  means  of  proof  of  identity.  Vol.  8,  p. 
702,  Feb.,  1916. 

Voting  pov/er  of  American  Bankers  Asso- 
ciation delegate 

1346.  (Va.)  Opinion  that  under  the 
constitution  of  American  Bankers  Associa- 
tion and  also  of  Virginia  Bankers  Association 
a  delegate  is  entitled  to  but  one  vote  upon  any 
question,  even  though  he  may  represent  as  a 
delegate  more  than  one  member  institution. 
Vol.  4,  p.  91,  Aug.,  1911. 

Payment  and  credit  of  overdraft  as 
deposit 

See  297,  208 

1347.  (Wis.)  John  Smith  has  an  ac- 
count at  Bank  A  and  presents  the  check  of 
Jones  drawn  on  the  same  Imnk  at  the  paying 
teller's  window  and  receives  cash  for  the 
same.  Jones  had  not  sufficient  deposit  to 
protect  the  check  and  the  bank  asks  if  it  can 
charge  back  the  overdraft  to  Smith's  account. 
Opinion:  The  great  weight  of  authority  is  to 
the  effect  that  a  payment  of  a  check  to  a 
bona  fide  holder  in  the  ordinary  course  of 
business  by  the  bank  upon  which  it  is  drawn, 
under  the  mistaken  belief  that  the  drawer 
has  funds  in  bank  subject  to  check,  is  final 
and  irrevocable  and  not  such  payment  under 
mistake  of  fact  as  will  permit  the  bank  to 
recover  the  money  so  paid.  Bank  A  having 
paid  Jones'  overdraft  to  Smith  in  cash,  the 
latter  is  not  liable  to  refund  the  money  and 
the  bank  cannot  charge  the  same  to  his  ac- 
count.   Vol.  6,  p.  G25,  Mar.,  1914. 

1348.  (Wis.)  John  Smith  deposits  with 
the  receiving  teller  of  his  bank  a  check  drawn 
on  the  same  bank  and  receives  credit  for  the 
same.     Later  it  appears  that  the  maker  of 


the  clieck  had  not  sufficient  funds  to  protect 
the  check.  The  Ijank  asks  if  it  can  right- 
fully charge  back  the  overdraft  to  Smith's 
account.  Opinion:  Where  an  overdraft  of 
one  depositor  is  olfered  for  deposit  by  another 
and  credited  to  tlie  latter's  account,  tlie  legal 
effect,  according  to  a  number  of  authorities 
is  the  same  as  if  the  money  was  first  paid 
out  and  redepositcd ;  in  other  words,  the 
])ayment  by  credit  to  account  is  final  and 
irrevocable.  But  in  California  the  courts 
hold  that  a  bank  which  receives  a  deposit  of 
a  check  drawn  on  the  same  bank  takes  the 
same  for  collection  from  itself  and  can  cancel 
the  credit  upon  discovering  on  the  same  day 
that  it  is  an  overdraft.  And  (according  to  a 
Pennsylvania  case)  where  a  dejK)sitor  knows 
that  the  drawer  has  no  funds  lie  is  guilty  of 
fraud  which  will  justify  charging  the  check 
back.  Furtliermore,  as  was  held  in  a  New 
York  case,  it  is  competent  for  the  bank  to 
credit  the  depositor's  account  conditionally, 
that  is  upon  condition  that  if  upon  examina- 
tion the  check  is  found  not  good  it  will  be 
charged  back.  And  a  recent  decision  in  the 
Court  of  Appeals  of  Missouri  is  to  the  effect 
that  where  the  bank  can  prove  a  custom  to 
charge  back,  this  will  entitle  the  bank  to 
cancel  the  credit.  In  the  light  of  the  forego- 
ing. Bank  A  cannot  charge  back  to  the  ac- 
count of  Smith  the  check  of  another  depositor 
which  has  been  placed  to  his  credit  upon 
later  discovering  such  check  is  an  overdraft 
unless  (1)  Smith  knew  that  the  check  was 
not  good  at  the  time  he  deposited  it,  or 
(2)  Bank  A  had  an  agreement  with  Smith 
that  the  deposit  should  be  conditional  upon 
examination  as  to  the  state  of  the  drawer's 
account,  or  (3)  Bank  A  can  prove  an  estab- 
lished custom  among  the  banks  of  the  city 
known  to  Smith  of  charging  back  later  in  the 
day  if  the  deposit  is  found  to  be  an  overdraft. 
The  latter  is  on  the  authority  of  the  ^lissouvi 
case  and  may  not  be  universally  followed. 
To  protect  the  bank  in  such  cases  it  would 
seem  advisable  to  print  a  notice  in  the  pass- 
books or  on  the  deposit  slips  of  customers  to 
the  effect  that  such  deposits  will  be  credited 
conditionally  and  if  not  found  good  at  the 
close  of  business  will  be  charged  back  and 
depositors  notified.  Vol.  6,  p.  62o,  Mar., 
1914. 

1349.  (Wis.)  John  Smith  deposits  in 
Bank  A  a  check  of  Jones  drawn  on  a  New 
York  bank  and  receives  credit  for  the  same. 
Payment  of  the  check  is  refused  by  the  New 
York  bank.  Bank  A  asks  if  it  can  charge 
back  the  item  to  Smith's  account.     It  also 


166 


MISCELLANEOUS 


1350 


asks  if  Smith  had  received  cash  couhl  his  ac- 
count still  be  charged.  Opinion:  The  hank 
of  deposit  has  the  right  to  charge  the  amount 
back  to  Smith's  account,  but  care  must  be 
taken  to  preserve  Smith's  liability  as  in- 
dorser,  assuming  he  has  transferred  title  to 
the  bank  and  not  merely  deposited  it  for  col- 
lection. Smith  being  duly  charged  as  in- 
dorser,  he  would  be  indebted  on  the  chock 
to  the  bank  and  even  though  cash  had  been 
paid  to  him,  the  bank  would  have  the  right  to 
set  off  such  indebtedness  to  his  account.  Vol. 
6,  p.  625,  Mar.,  1914. 

1350.  (N.  Y.)  Li  Oddie  v.  Xational 
City  Bank,  45  N.  Y.,  735,  the  court  held 
that  where  the  check  of  one  depositor  is  de- 
posited by  another,  and  the  teller  gives  him 
credit  therefor,  such  credit  cannot  be  revoked 
upon  finding  the  check  was  not  good.  A  Xew 
York  bank  complains  that  this  decision  seems 
unfair  and  is  contrary  to  the  decisions  of 
other  states.  It  asks  if  this  decision  is  still 
law  in  New  York,  and  if  it  would  be  possible 
for  a  bank  to  protect  itself  by  some  sort  of 
contract  or  agreement  printed  in  its  pass- 
books or  on  its  deposit  slips  or  both  to  the 


effect  that  all  checks  received  on  deposit  are 
subject  to  final  payment.  Opinion:  The  rule 
established  in  Oddie  v.  Xational  City  Bank 
that  a  credit  in  a  depositor's  passbook  of  an 
overdraft  of  another  depositor  is  final  and 
irrevocable  has  not  been  overturne^l  in  New 
York.  Decisions  in  other  states  conflict. 
The  same  rule  has  been  held  in  Alabama  and 
Pennsylvania.  On  the  other  hand,  in  Cali- 
fornia, it  has  been  hold  that  "when  a  dieck 
on  the  same  bank  is  presented  by  a  depositor 
with  his  passbook  to  the  receiving  teller,  and 
he  merely  receives  tiie  check  and  notes  it  in 
the  passbook,  nothing  more  being  said  or 
done,  this  does  not  of  itself  raise  the  pre- 
sumption that  the  check  was  received  as 
cash  or  otherwise  than  for  collection."  This 
rule  is  the  more  equitable  one,  but  it  cannot 
be  said  to  be  the  law  of  New  York ;  therefore 
it  would  be  advisable  to  print  on  the  dcjwsit 
slip  and  probably  also  in  the  passbook  a 
properly  worded  clause  giving  the  bank  the 
right  to  charge  back  a  wrongly  credited  over- 
draft on  itself  at  any  time  before  the  close  of 
business  on  the  same  dav.  Vol.  5,  v.  50n, 
Mar.,  1913. 


167 


INDEX 

ACCEPTANCE  AND  CERTIFICATION 

Opinion  Numbers 

Acceptance  after  banking  hours 1 

Acceptance  indorsed  on  back  of  bill 883 

Acceptance  must  be  written 2-7 

Acceptance  on  note 8 

Alteration  of  check  after  certification 85 

Bank's  obligation  to  pay,  not  to  certify 9-1 1 

Bank  officer's  authority  to  certify 3(5 

Certification  equivalent  to  acceptance 15 

Certified  check  holder  not  a  preferred  creditor 208 

Certified  checks,  stopping  payment  of 50 

Certifying  bank's  liability  to  fraudulent  holder 16 

Check  against  uncollected  funds 429 

Check  without  funds 36 

Drawer's  liability  on  accepted  draft 17 

Duty  to  request  certification 386 

Effect  of  remittance  stamp 347 

Forged  checks 18-20 

Fraud,  check  obtained  through 22 

Guarantees  signature  and  sufficiency  of  funds 21 

Holder  in  due  course 22 

Immediately  charging  customer's  account 26 

Indorsement  must  be  properly  made 23-25 

Language  expressing  certification  construed 27-34 

Letters  "O.K."  as  certification. 35-36 

Limitation  as  to  time 37-38 

Outstanding  certified  checks 39-42 

Overdraft,  criminal  penalty 35 

Post  dated  checks 12-14 

Raised  check 47 

Revocation  of  mistaken  certification  of  stopped  check 48 

Rule  of  24  hours  for  acceptance 43-16 

Stamp  including  amount  certified  not  advantageous 49 

Stamp  to  indicate  whether  at  request  of  drawer  or  holder lt> 

Statute  of  limitations 39-U 

Stranger,  certification  for 21 

Telegraph,  certification  by 51-55 

Telephone,  certification  by 56-65 

Trade  acceptances .  132S-133S 

ACCOMMODATION  IND0R8ERS 

Accommodation  and  commercial  paper  distinguished 66 

Corporation's  power  to  act  as  accommodation  indorser 130, 994 

Entitled  to  notice  of  dishonor .  .76, 1022-1024, 1173 

Illegality  as  a  defen.se 77 

Indorsement  after  delivery 67-69 

Liability 70-72 

Liability  as  between  themselves 73-75 

Liability  on  corporation  note 76-77, 1023 

Married  woman  as  accommodation  indorser 834-843 

ACKNOWLEDGMENT 
See  Notaries 


ADMINISTRATOR 
See  Executor  and  Administrator 


ADVERTISEMENT 

Opinion  Numt)C'r8 


A<lvorti.siii{2;  for  "savings"  accountH 188-870 

Advcrtining  of  capital 78 

Advertising  with  U.  S.  flag 79-81 


AGENCY 

Authority  of  agent  to  indorse 671-678 

Bank  as  agent  to  procure  loan 167 

Bank's  liabiHty  for  viohition  of  instructions 2o0,  3G8 

Bank  not  chargeable  with  knowledge  in  possession  of  director 194 

Death  of  principal  revokes  authority 451 

Liability  of  bank  for  unauthorized  act  of  cashier 195 

Note  collected  by  agent  without  authority 990 

Notice  of  dishonor  by  agent  to  principal 1025 

Payment  of  check  to  infant  agent 848 

Power  of  attorney  coupled  with  interest 462-463, 1074 

Protest  by  notary's  clerk 1111 

Railroad  carrying  mail  as  public  agent 832 

Set  off  against  deposit  marked  "agent" 1222 

Telegraph  operator  as  accepting  bank's  agent 51 


ALTERED  AND  RAISED  PAPER 

See  Forgery 

Blank  form  of  another  bank  used 82-84 

Certification  of  raised  check 47 

Check  raised  after  certification 85 

"Collection "  rubber  stamped  on  instrument 86 

Duty  of  care  in  preparing  checks 93,  341-344 

Erasure  by  acid 87-88 

Erasure  of  interest  clause 746 

Liability  for  paj'ment 89-94 

Material  alteration 95-96 

Place  of  pajonent  altered 97-98 

Protest  of  check  with  altered  date 1110 

Raised  checks 99-100 

Recovery  by  drawee  from  accommodation  indorser  of  raised  check 70 

Recovery  of  money  paid 101-107 

Statement  of  consideration,  altered lOS-1 1 1 

Time  of  payment  altered 112-115 

Written  in  lead  pencil 116 


ASSIGNMENT 
See  Pledge  and  Collateral 

Check  as  an  assignment 450-46 1 

Notice  of  assignment 1046-1047 

Of  account 1046-1047, 1062 

Of  deposit 465-467 

Of  life  insurance  policy 1073 

Of  passbook 1037-1040 

Set  off  against  assigned  deposit '. 1226 

Transfer  of  deposit  slip 473 

ii 


ATTACHMENT  AND  GARXISHMEXT 

Opinion  Numbers 

Account  owned  by  one  person  in  name  of  another 117 

Attachment  of  insufficient  deposit  bj'  two  creditors 1  IS 

Bank  garnished  for  debt  of  check  holder 1  HVrjO 

Bank  not  indebted  at  time  writ  is  served 121-122 

Bank's  obligation  to  disclose  balance 123 

Funds  represented  by  certificate  of  deposit 124-127 

Funds  represented  by  outstanding  negotiable  instrument .  12JN-130 

Notice  with  incorrect  name 131-132 

Precedence  over  checks  not  presented  before  service  of  writ 133-135 

Proceedings  may  be  instituted  before  judgment 139 

Proceeds  of  bill  of  lading  draft 13G-138 

Property  subject  to  garnishment 140-145 

Set  off  by  bank  to  defeat  attachment 14tj-14S 


ATTORNEY'S  FEES 

Attorney's  fee  note  payable  at  bank 149 

Claim  of  attorney's  fee  in  bankruptcy loO 

Excessive  fee  as  cover  for  usury 745 

Negotiability  of  notes  with  attorney's  fee  clause 151-155 

Validity  of  attorney's  fee  clause 156-163 


BANKS  AND  BANKING 

Advertising  of  capital "S 

Advertising  with  United  States  flag 79-Sl 

Bank  as  agent  to  procure  loan lt>7 

Bank  as  borrower  on  personal  note  of  executive  officer 168-169 

Bank  loans.     See  Loan  and  Discount. 
Banking  customs.     See  Custom. 

Banking  hours 1  "0- 1 7 1 

Books  and  records,  examination  of 164-165 

Books,  use  of  loose  leaves 166 

Branch  banks 261-265 

Cashier's  unauthorized  act,  liability  for 195-196 

Customer's  balance  for  tax  purposes,  etc.,  compulsory  disclosure 173-176 

Deposits,  no  obligation  to  receive 469-470 

Deposits,  unclaimed  required  to  be  published 503 

Derogatory  statements  affecting  banking  institutions 792-797 

Dishonor  of  check,  liability  for  wrongful 506-511 

Duty  of  substituted  presentment  when  check  is  lost 798, 817-818 

General  duty  of  secrecy  as  to  customer's  affairs 172 

Guaranty  by  bank 17/ -180 

Guaranty  of  payee's  indorsement,  right  to  require 695 

Indemnity  bond,  covering  risk  of  unauthorized  indorsements 181 

Letter  of  credit,  protection  against  overdraft 105.8-1059 

Liability  of  bank  to  checkholder •  345-346 

Liability  to  bank  of  pcr.son  identifying  payee 182 

Lien  of  stockholder 228-236 

National  Banks 870-887 

Notes  payable  at  bank 1007-1021 

Payment  to  minors  and  incompetents 844-8.)5 

Postal  savings  depositary,  right  to  act  as 489-190 

Private  affairs,  investigation  by  Congressional  Committee 184 

Right  to  pledge  assets ^8"' 

Safe  depositary,  bank  as 1^' 

Same  room  for  savings  bank  and  bank 1^' 

"Savings, "  by  commercial  bank,  use  of  word 1^ 

iii 


BANKS  AND  BANKING— Ojntinued 

Opinion  Numbers 

Set  off 1177-1230 

Statement,  due  diligence  in  examining 189 

Statement  of  customer's  financial  condition,  liability  for 190-192 

Statement  to  procure  credit 044 

Taxation  of  l)ank8 1290-1327 

Ultra  Vires  Acts  177,  178,  823,  874,  884 

Vouchers  returned  without  receipt  unsafe 359 


BANK  OFFICERS  AND  DIRECTORS 
See  Cashier 

Bank  as  holder  of  director's  note 194 

Bank's  liability  for  officer's  false  statement 192 

Bank's  liability  for  unauthorized  act  of  cashier 195-196 

Cashier  buying  liis  own  note  for  bank 961 

Cashier  of  national  bank  need  not  be  a  director 197 

Director  of  national  bank  as  surety 885 

Duty  to  deface  counterfeit  money 19S 

Interlocking  bank  directorates 199-201 

Loans  to  bank  official 183 

Officer  and  director  as  notary 914-957 

Officer  as  attesting  witness 202 

Overdraft  by  director 203 

Personal  liability 204-206 

Power  of  officer  to  certify  checks 14,  38,  180 

Power  to  borrow  money  for  use  of  bank 207 

President  of  national  bank  as  bond  broker 193 

Subpoena  duces  tecum  served  on  officer 104-165 

BANKRUPTCY  AND  INSOLVENCY 

Assignee  of  accounts  receivable  as  preferred  creditor 1062 

Certified  checkholder  not  a  preferred  creditor 208 

Claim  of  attorney's  fee 150 

Claim  to  dividends 209 

Collecting  bank's  insolvency 410-417 

Depositaries  for  estates  in  bankruptcy- 210 

Discharge  as  bar  to  unlisted  claim 211 

Dividend  check  of  failed  national  bank 212 

Innocent  purchaser  of  negotiable  paper  transferred  by  bankrupt 216 

Liability  of  transferor  of  stock  to  assessment 220 

Liens  within  four  months  of  bankruptcy 213-214 

Payment  of  check  on  insolvent  bank 215 

Preference  not  created  where  collateral  renewed 217-218 

Preferred  claim  against  insolvent  collecting  bank 416-417 

Property  inherited  after  adjudication 219 

Recovery  of  paper  deposited  for  collection  when  bank  insolvent 420 

Rights  and  liabihties  as  to  collection  proceeds 410-415 

Right  of  trustee  in  bankruptcy  to  vote  national  bank  shares 242 

Set  off  against  deposit  of  insolvent  borrower 1188,  1190-1193, 1227 

Set  off  of  unmatured  note  against  insolvent's  deposit 1224-1230 

BANK  STOCK  AND  STOCKHOLDERS 
See  Corporations,  Dividends  and  Liens 

Bank  as  lienor  can  refuse  to  transfer  stock 230,  233-235 

Corporation  tax  on  bank  shares 1301 

Dividends 221 

iv 


BANK  STOCK  AND  STOCKHOLDERS— Continued 

Opinion  Xumbera 

Double  liability 222-224 

Holder  in  due  course  of  lost  certificate 808 

Increase  of  national  bank  stock 225 

Inspection  of  books  and  records 226-227 

Liability  of  minor  as  stockholder 845 

Liability  of  transferor  to  assessment 220 

Lien  of  national  bank  for  stockholder's  indebtedness ....  230-232, 236 

Lien  of  state  bank  for  stockholder's  indebtedness 22<,  229,  233,  235 

Loan  on  shares  of  stock  by  national  bank  prohibited 882 

Right  to  dividends  of  pledged  stock 237-238 

Stockholder  as  notary 914-957 

Stock  issued  in  name  of  partnership 239 

Transfer  of  bank  stock 240-241 

Voting ...  242-243 


BILLS  OF  LADLVG 

Acceptor's  liability  on  B/L  draft 244 

Bank's  liability  for  violation  of  instructions 250 

Collection  of  B/L  draft 367-369 

Consignor  cannot  change  routing 252 

Disclaimer  of  warrantor  liability 257-260 

Effect  of  absence  of  shipper's  signature 254 

Guaranty  of  draft  by  bank 178 

Interstate  shipment  of  intoxicating  liquor 418-419 

Interstate  shipment, — jurisdiction  of  cause  of  action 252 

Liability  for  issuing  B/L  without  receipt  of  goods 251 

Obtaining  B/L  under  false  pretenses 628 

Protest  of  draft 1133 

Purchase  of  B/L  drafts  by  national  banks 877 

Recovery  by  drawee  of  money  paid  on  non-negotiable  B,  L  draft 245 

Rights  of  attaching  creditor  of  shipper 246-249 

Rights  of  payor  of  draft  where  goods  not  according  to  contract 256-260 

Shipper's  indorsement  supplied  by  collecting  bank 253 

Uniform  B/L  Act  relative  to  purchase  and  collection 255 


BLANK  SPACES 

Check  signed  in  blank -293-294 

Payee  blank  unfilled  puts  bank  on  inquiry 890 

Space  filled  in  accordance  with  authority 960 

Space  for  interest  left  on  note 746 

BONDS 

Bank's  liability  on  indemnity  l)ond 886 

Bank's  right  to  require  l)ond  for  lost  paper 824-826 

Bond  to  protect  against  payment  upon  unauthorized  indorsement 181 

Duplicates  for  lost  government  bonds 819 

Fidelity  bonds 633-634 

President  of  national  bank  as  bond  broker 193 


BRANCH  BANKS 

Presentment  and  payment  of  checks 2'U-263 

Presentment  and  payment  of  note 2**'* 

Right  to  estal)lish  branches 265 

V 


BV-LAWS 

Opinion  Numbers 

Bj'-law  providing  for  secret  stock  lien 230 

By-lHW  re(|uirinn  surety  company  bond 822 

Disclaimer  of  liability  iii)on  loss  of  passbook 1045 

Failure  to  adopt  by-laws  does  not  invalidate  acts  of  corporation 431 

Lost  paper,  requiring  bond  for » 816 

CASHIER 

Cashier  buying  his  own  note  for  bank 961 

Cashier  has  no  authority  to  bind  bank  in  guaranty  agreement 14, 180 

Cashier  of  national  bank  need  not  be  director 197 

Cashier's  checks 130,  570-571,  809,  824,  1236,  1238 

Liability  of  bank  for  unauthorized  act 195-196 

Mortgage  to  national  bank  in  name  of  cashier 856 

Power  to  borrow  money  for  use  of  bank 207 


CERTIFICATE  OF  DEPOSIT 

Attachment  of  funds  represented  by  certificate 124-127 

Bank's  obligation  to  know  payee's  signature 280 

Demand  and  time  certificates  distinguished 266-268 

Forgerj'  of  payee's  indorsement 280, 512, 515,  563 

Holder  protected  by  guaranty  fund 480 

Indorsement  "all  prior  indorsements  guaranteed" 724 

Indorsement  by  alternative  paj-ee 670 

Rights  of  innocent  purchaser 273-274 

Insanity  of  payee 275 

Issued  in  two  names 502 

Loan  by  national  bank  on  security  of  its  certificates 882 

Lost  certificate  of  deposit 281,  806,  825 

Maturity 267,  278 

Negotiability * 276-277 

Passbook  and  negotiable  certificate  distinguished 141 

Payable  "in  current  funds" 271-272 

Payable  to  minor 850 

Presentment  after  death  of  payee 269-270 

Statute  of  hmitations 278-279 

Transfer  without  indorsement 281 

Withholding  payment  of  time  certificate 282 

CASHIER'S  AND  CERTIFIED  CHECKS 

Cashier's  checks 130,  570-571,  809,  824,  1236,  1238 

Certified  checkholder  not  a  preferred  creditor 208 

Postdated  certified  checks 12-14 

Stopping  payment  of  cashier's  and  certified  checks 1236-1241 

CHATTEL  MORTGAGES 
Chattel  mortgages 857-863 

CHECKS— PAYMENT  OF 

Ambiguous  and  incomplete  checks 2S3-2S5 

Bad  checks,  criminal  liability  for  issuing 621-627 

Bearer  check  without  indorsement 2S9-292 

Bearer  checks,  instruments  purporting  to  be 286-2SS 

Blank  form  of  another  bank  used 82-84 

vi 


CHECKS— PAYMENT  OF— Continued 

Opinion  Numbers 

Cashier's  checks 130,  570-571,  809,  824,  1236,  1238 

Certified  checks,  post  dated 12-14 

Certified  checks,  stopping  payment  of 1237-1241 

Check  as  an  assignment 450-461 

Check  drawn  on  another  department  of  same  bank 297 

Check  without  funds 621-627 

Checks  for  less  than  one  dollar 333 

Checks  signed  in  blank 293-294 

Checks  with  suspicious  appearance S46 

Conditional  deposit  of  check 475 

Conditional  payment  by  check 1050-1051 

Conversion  of  check  by  bank 295 

Counter  check,  receipt  as  substitute  for 296 

Crediting  depositor's  account  with  checks  on  same  bank  operates  as  payment 297-298 

Draft  drawn  on  particular  fund 323 

Drawer  of  check  a  fugitive  from  justice 302 

Drawer's  liability  on  unpaid  check 303 

Duty  of  care  of  check  book 304 

Exchange  charge,  payment  of 305-306 

"For  full  payment  of  account" 307-311 

Gambling  debt,  given  for 313-314 

Holder  in  due  course.     See  Holder  in  Due  Course. 

Holiday,  payment  on G5<Mi63 

"In  exchange"  effect  on  negotiabihty  of  provision 315-316 

Instrument  payable  at  future  date 312 

LfOSt  or  stolen  checks.     See  Lost  and  Stolen  Paper 798-828 

Memorandum  on  check,  effect  of 317 

More  than  balance,  checks  for 318-322 

Negotiability,  provisions  affecting 324 

"Not  payable  through  express  company " 325-327 

Official  check  for  private  use,  payment  unsafe 32S-332 

Partnership  checks 334 

Payable  in  one  state  and  negotiated  in  another 335-336 

Paj'able  to  A  "for  account  of  B " 337 

Payable  to  drawee  and  presented  by  third  person 338 

Payable  to  two  payees 708 

Payroll  check,  form  to  protect  against  loss 339 

Point  of  time  when  check  received  through  mail  is  paid 300-301 

Postdated  checks .-^ 1083-1096 

Preparing  check,  duty  of  care 341-344 

Railway  pay  checks 591 ,  595 

Refusal  to  pay  duly  presented  check 345 

Relation  of  bank  ujxjn  deposit  of  check 299 

Remittance  stamp 347 

Return  of  vouchers  without  receipt  unsafe 359 

Revocation  of  check  by  bankruptcy 216 

Revocation  of  check  by  death 449—461 

Revocation  of  death  by  insanity  or  incompetency 846-847 

Right  to  pos.session  of  unused  certified  check 340 

Rule  of  24  hours  acceptance  not  ai)plirablc  to  checks 43—46 

Signatures 348-351 

Special  deposit,  drawn  against 393 

Stale  checks 352 

Stamping  check  " PAID" 353-354 

Stamping  check  "PAYMENT  STOPPED" 1259-1201 

Stopping  paj-ment 1231-1289 

Stranger  payee 355 

Strangers,  checks  cashed  for 557-560 

Traveler's  checks 608-609 


CHECKS— PAYMENT  OF— Coiitiiiuod 

Opinion  Numbers 

Undated  chocks 356-358 

"  Willi  exchange, "  effect  of  provision 3(30-362 

Words  and  figures  differ 303-366 

CLEARING  HOUSE 

Check  drawn  on  A  "payable  if  desired  at  B"  prohibited .  .  891 

Presentation  of  checks  for  more  than  balance 318-319,  322 

COLLECTION 

Bill  of  lading  draft 367-369 

Checks  lost  in  the  mail 798-799 

Circuitous  routing 370-372 

Correspondent,  selection  of 373-375 

Crediting  depositor's  account  with  checks  on  same  l)ank  operates  as  payment 297-298 

Default  of  correspondent,  liability  for 376-383 

Disclaimer  of  liability  for  negligence 384-385 

Drawee  only  bank  in  place 385,  406, 409 

Duty  of  collecting  bank 386-390 

Duty  of  collecting  bank  where  proceeds  under  garnishment 136 

Duty  to  trace  unacknowledged  items 426-427 

Express  company  as  collecting  agent 391-392 

Following  instructions , 393-397 

Forwarding  paper  direct  to  drawee 398-409 

Insolvency  of  collecting  bank 410-415 

Interstate  shipment  of  liquor 418-419 

Items  received  by  insolvent  banker 420 

Liability  for  not  turning  over  proceeds 423 

Lien  on  paper  fonvarded 421—422 

Payment  of  exchange  charge 305-306 

Postdated  checks 10S3,  1091 

Preferred  claim  against  insolvent  collecting  bank 416-417 

Proceeds  paid  in  advance  of  collection,  recover}'  of 424 

Protest,  duty  of  collecting  bank  to lllS-1119,  1137-1139,  1145 

Set  off  of  proceeds  against  bankrupt's  indebtedness 1177 

Specific  deposit,  charging  items  against 393 

Subsequent  deposit,  charging  note  against 425 

Substituted  presentment  of  lost  check  collecting  bank's  duty  of 798,  817-818 

Title  of  bank  to  paper  deposited 299, 421,  428 

Uncollected  funds,  payment  against 428-429 

COMMON  CARRIER 

Bill  of  lading  issued  without  taking  up  goods 251 

Carrying  mail  as  public  agent 832 

Delivery  of  package  after  banking  hours 171 

Indorsement  by  railroad  agent  of  checks  payable  to  company 676 

Railway  pay  checks 591,  595 

CONTRACTS 

Acceptance  of  offer  by  mail 829 

Disclaimer  of  liability  for  payment  of  stopped  check 1242-1244 

Disclaimer  of  liability  of  collecting  bank's  negligence 384-385 

Check  given  for  gambling  debt 313-314 

Contracts  bj'  persons  under  guardiansliip 844 

Contract  to  pay  commission  on  sale 1344 

Married  women  as  contracting  parties 834-843 

Validity  of  contract  made  on  Sunday 652, 657-658 

viii 


CORPORATIONS 
See  Bank  Stock  and  Stockholder 

Opinion  Numbers 

Accommodation  indorser's  liability  on  corporation  note 74,  76-77 

Authority  of  officer  to  use  corporate  funds 32Q,  331 

Books  and  records,  inspection  of 22(>-227 

By-laws,  failure  to  adopt 431 

Corporation  tax  law 1293-1295 

Criminal  liability  for  issuing  bad  checks 622 

Dividends,  nature  of  unpaid 432 

Dividend,  right  of  purchaser  of  stock  to 433 

Double  liability  of  bank  stockholder 222-224 

Indorsement  by  corporation  on  renewal  of  trade  paper 994 

Personal  and  corporate  liability  on  note 434-438 

Power  to  guaranty  debt  of  another 874 

Power  to  indorse  for  accommodation 430 

Seal  unnecessary  on  corporation  note 996-997 

Signature  to  corporation  note 434-438 

Transfer  of  stock  on  books 1339-1342 

Ultra  Vires  Acts  by  banking  corporations 177- ITS,  823,  874,  884 

Usury  pleaded  as  defense 786 

Voting  control  by  fraction  of  share 439 

Voting  power  of  stockholder 440 

CURRENCY 
See  Legal  Tender 

Deposit  of  moneys  belonging  to  Indiana 471 

Duty  to  deface  counterfeit  coins 198 

Legal  tender  qualities  of  money 788 

Note  payable  in  "legal  tender"  and  "gold  coin'' 789 

Photographing  United  States  notes 641 

Taxation  of  Canadian  currency 1290-1292 

Theft  of  unsigned  bank  currency 828 

CUSTOxM 

Calculation  of  interest 747-748 

Filing  stop  payment  notices 1254 

Lost  checks  and  drafts  charged  back  to  customer's  account 817 

Mailing  check  direct  to  drawee 400, 409 

Payee's  indorsement  as  prerequisite  of  payment 714,  716 

Payment  of  check  after  drawer's  death 451 

Presentment  of  check  through  clearing  house 1 107 

Protest  by  notary's  clerk 1111 

Stamping  "  collection  "  on  notes 86 

Stamping  "Payment  stopped "  upon  checks 1259-1261 

DAMAGES 

Bank's  neglect  to  follow  instructions  in  collecting  paper 394 

False  statement  of  customer's  financial  condition 190-192 

Refusal  to  transfer  stock  to  bona  fide  purchaser 240 

Violation  of  B/L  instructions 250 

Wrongful  dishonor  of  check ...  506-51 1 

DEATH  AND  DECEDENTS  ESTATE 

Agency  revoked  by  death 47'J 

Authority  to  renew  notes  of  testator 447 

Bank's  right  to  credit  decedent's  account 442-443 


DKA'IH  AM)  I )I':(;i': DENT'S  ESTATE— Continued 

Opluion  Numbers 

Dpo(1  for  annuity 444 

Doiivcry  of  deed  after  death 445 

Delivery  of  K'ft  after  (lonce's  death 830 

Disposal  of  funds  of  intestate  hy  bank 446 

Heir's  note  for  dcc^cdent's  debt 448 

Partnership  account  where  one  partner  dies 334,  488 

Payment  of  check  after  drawer's  death 449-461 

Payment  of  deposit  to  administrator 441 

Power  of  attorney  affected  by  death 462 

Presentment  of  certificate  of  deposit  after  payee's  death 209-270 

Renunciation  of  interest  by  heir  procured  by  fraud 643 

Set  olT  atr;ainst  indebtetlness  of  decedent 1197-1202 

Survivorship  where  husband  and  wife  [)erish  in  same  disaster 668 

Transfer  of  stock  of  decedent 463-464 

DEED 

Deed  for  annuity 444 

Delivery  after  death  ineffectual 445 

DELIVERY 

Delivery  necessary  to  constitute  valid  pledge 1077 

Delivery  of  deed  after  death  ineffectual 445 

Delivery  of  express  package  after  banking  hours 171 

Gift  not  complete  without  delivery 667,  830, 1339 

Postmaster's  liability  for  misdelivery  of  registered  package 833 

Transfer  of  stock  by  deUvery 1339-1340 

DEPOSITS 

Assignment  of  deposit 465-467 

Bank  not  obliged  to  receive  deposits 469-470 

Banlcs  as  depositaries 471 

Check  as  an  assignment 450-461 

Crediting  depositor's  accoimt  with  check  on  same  bank  operates  as  payment  of  check 297-298 

Deceased  depositor's  accounts 441-464 

Deposit  by  one  person  crediting  account  of  another 478-479 

Deposit  for  safe-keeping 4.2 

Deposit  slip,  nature  of 4/  3-476 

Disclosm-e  of  customer's  balance 4i  7 

Gift  by  delivery  of  pass  book 667 

Giving  cash  instead  of  credit  for  deposited  item 496 

Guaranty  fund  of  depositors 480 

Husband  and  wife,  deposits  of 664-668 

Joint  deposit • 502 

Legal  tender,  pajTnent  in "^87 

Made  outside  of  bank 481-482 

Military  company,  deposit  of 483 

Minors  and  incompetents,  deposits  of 846-855 

Mistaken  credit  to  account 494-495 

Mistaken  payment  of  deposit 484—485 

National  bank  deposit  in  trust  company 871 

Notice  of  withdrawal  of  savings  deposit  in  national  bank 504 

Partnership,  deposit  by 4S7-488 

Payment  on  oral  order 486 

Postal  savings 489-490 

Public  deposits = 491 

Reserve  against  savings  deposits 492 

X 


DEPOSITS— Continued 

Opinion   Numbers 

"Savings, "  use  of  word ISS,  S70 

Set-off  of  deposits 1177-1230 

Specific  deposits 493 

Subsequent  deposits U3,  393    425,  1212 

Time  deposits 497 

Trust  funds 493 

Two  names,  deposit  in 502 

Unclaimed  deposits  required  to  be  published 503 

Use  of  assumed  name 408 

DISHONOR 

Drawer's  liability  on  unpaid  draft 505 

Wrongful  dishonor  of  checks 506-5 1 1 

Presentment  of  instrument  with  indorsement  lacking 1131-1134 

DIVIDENDS 

Dividend  check  on  failed  national  bank 212 

Nature  of  unpaid  dividends 432 

Pledgee's  right  to  dividends  of  pledged  stock 237-238 

Right  of  purchaser  of  stock  to  dividends 433 

DRAFTS 

Draft  drawn  on  particular  fund 323 

Drawer's  liability  for  stopped  draft 049 

Drawer's  hability  on  unpaid  draft 505 

Form  of  indorsement  to  restrict  negotiability 725 

Gift  through  the  mail 830 

Guaranty  of  draft  by  bank 874 

Holder  in  due  course  of  stolen  draft 801,  803 

Holder  in  due  course  of  stopped  draft 6 17,  049 

Indorser  discharged  by  payment ^099 

Lost  or  stolen  drafts 799-801,  S03, 826,  827 

Negligence  in  failing  to  notify  of  lost  di-af t 799 

Negotiation  within  reasonable  time 801 

Payable  "through"  or  "in  care  of"  bank 1103, 1104 

Payable  "with  New  York  exchange" 1061 

Payment  by  mistake 1053 

Presentment  of  time  draft  for  acceptance 3S8 

Protest  of  draft 109S.  1133,  1145 

Provisions  affecting  negotiability 2 1 1,  323. 909,  1 145 

Rule  of  24  hours  for  acceptance 43-40 

EXCHANGE 

Checks  "not  payable  through  express  company" .■>25-327 

Exchange  charge 305-30«i 

Instrument  payable  "in  current  funds" 271-272 

Effect  of  words  "in  exchange" 315-316 

Effect  of  words  "with  exchange " 300-302 

EXECUTOR  AND  ADMINISTRATOR 

Authority  to  renew  notes  of  testator 1 17 

Bank  may  demantl  letters  of  administration 441 

Decedent's  stock  claimcil  by  administrator 479,  1 197 

Deposit  of  check  by  administrator  l^efore  lie  has  qualified 442 

Transfer  of  stock  to  administrator 464 

Voting 243 


FORGERY 

Sec  Altered  and  Raised  Paper 

Opinion   Numbers 

Altering  name  of  drawee  on  forged  check OIH 

Bank  bound  to  know  depositor's  sinnature 512-017 

Certifindion  of  forged  cliocks 18-20 

CJieck  hearing  forged  and  genuine  signatures 52.'J-o2i) 

Checks  cashed  for  strangers 5!j7-'A')() 

Check  (hiled  on  Sunday 020 

Checks  signed  in  fictitious  name Oil 

Criminal  ofTense,  possession  of'forged  instnuuent 642 

Drawer's  duty  of  examination  and  verification 527-528 

Effect  of  delay  in  giving  notice  of  forgery 575-570 

Effect  of  waiver  of  identification 595 

Estoppel  to  assert  forgery  of  indorsement 613-614 

Forged  counter-signature  to  traveler's  check  or  money  order 608-610 

Forged  draft  against  lost  letter  of  credit 619 

Forged  name  of  drawee 617 

Forged  order  on  savings  deposit 529-533 

Forged  telegrai)h  order  to  pay  money 564-566 

Forgery  of  signature  by  mark 561-563 

Indorsement  by  person  of  same  name 585-590 

Indorsement  by  precise  person  intended 591-594 

Indorser's  warranty  to  subsequent  purchaser 612 

Liability  of  person  identifying  impersonator 615-616 

Non-recovery  of  money  paid  on  forged  check 534-547 

Non-recovery  of  money  paid  on  forged  indorsement 582-584 

Obtaining  money  under  false  pretenses 638 

Payment  of  forged  check  not  chargeable  to  drawer 51S 

Payment  chargeable  where  drawer  estopped 519-522 

Protest  of  forged  checks 1123-1 125 

Recovery  of  money  paid  on  forged  bearer  check 596-597 

Recovery  of  money  paid  on  forged  check 548-556 

Recovery  of  money  paid  on  forged  indorsement 567-569,  572-574 

Recovery  where  indorsement  guaranteed 577-581 

Signature  and  indorsement  both  forged 598-604 

Statute  of  limitations  as  apphed  to  forged  indorsements 605-607 


FRAUD' AND;^  CRIMES 

Bad  checks,  criminal  liabihty  for  issuing 621-627 

Bill  of  lading  obtained  under  false  pretenses 628 

Burglary  policy  of  the  American  Bankers  Association 629 

Certification  by  officer  of  overdraft 35 

Check  signed  in  fictitious  name  with  intent  to  defraud 611 

Collection  items  fraudulently  received  by  insolvent  banker 420 

Conspiracy  to  commit  robbery 630 

Conversion  of  notes  by  innkeeper 631 

Delivery  of  goods  without  taking  up  warehouse  receipt 632 

Derogatory  statements  affecting  banks 792-797 

Duty  to  deface  counterfeit  coins 198 

False  statement  that  certificate  of  deposit  is  lost 281 

Fidelity  bonds 633-634 

Firm  checks  issued  through  fraud  of  employee 635 

Forgery  of  check  dated  on  Sunday 620 

Fraud  in  overdrawing  letter  of  credit 1059 

Interstate  shipment  of  intoxicating  liquor 418-419 

Introducing  swindler  to  bank 636 

Obtaining  money  under  false  pretenses 637-639 

Passing  worthless  state  bank  bill 640 

Photographing  United  States  notes ."/. .  T 641 

xii 


FRAUD  AND  CRIMES— Continued 

Opinion  Numbers 

Possession  of  forged  instrument  with  intent  to  defraud 642 

Renunciation  of  interest  by  heir  procured  by  fraud 643 

Statement  to  procure  credit 644 

Theft  of  registered  mail  by  railroad  employee 832 

GIFl'S 

Gift  of  bank  draft  through  the  mail 830 

Not  complete  without  delivery 499,  667,  830,  1339 

Of  bank  stock. 1339 

GUARANTY 

"All  prior  indorsements  guaranteed " .  .  71S-724 

Cashier's  guaranty  of  post  dated  check ISO 

Defective  indorsement 696-C98 

Drawee's  right  to  require  guaranty  of  payee's  indorsement 694-695 

Guaranty  fund  of  doiK)sitors 4S0 

Guaranty  of  missing  indorsement 669-685 

Indorscr  as  guarantor 700 

Power  of  bank  to  guarantee  draft .  .  177-17S 

Release  by  extension  of  time .  .  9(>4-9()6 

Securities  guaranteed  by  salesman .  .  1076 

Signature  guaranteed 179,  517 

Statute  of  limitations 961,  1003 

HOLDER  IN  DUE  COURSE 

Certificate  of  deposit  indorsed  by  minor 850 

Certified  check 22 

Check  given  for  gambling  debt 313-314 

Check  payable  to  drawee  and  presented  by  third  person 338 

Check  signed  in  blank 293-294 

Effect  of  indorsement  "without  recourse" 740 

Instrument  indorsed  in  blank  and  stolen 806-81 1 

Negotiable  certificate  of  deposit 273-274 

Paper  indorsed  for  accommodation  by  corporation 430 

Raised  checks 99-100 

Rediscounted  note •  ■  t>45 

Stolen  paper .  .  SOl-805 

Stopped  check .  •  t>4«)-650 

Stopped  draft (J-i7,  649 

HOLIDAYS,  SATURDAY  AND  SUNDAY 

Forgery  of  check  dated  Sunday <''20 

Instrument  executed  on  holiday l>51-653 

Instrument  maturing  on  Saturday 654-656 

Notes  executed  and  delivered  on  Sunday 657-058 

Payment  of  check  on  holiday •  659-<}63 

HUSBAND  AND  WIFE 

See  also  Married  Women 

Attachment  of  wife's  account  by  husband's  creditor 127 

Authority  to  draw  checks 664-666 

Husband's  account  in  name  of  wife 667 

Husband's  account  in  trust  for  wife •'*'8 

Joinder  of  wife  in  chattel  mortgage ^8 


INDORSER— INDORSEMENT 

Opinion  Xuiubere 

Ahsoncc  of  payee's  indnrsomcnt 6t)9 

Acc()imn(Hl:itii)ii  iiulorsomoiit 66-77 

Altonition  of  dnift  jiftcr  indorsement 94 

Alternative  payee,  indorsement  \>y 670 

Authority  of  a^ent  to  indorse 671-678 

Bearer  elieeks  do  not  legally  require  indorsement 679-680 

Blank  indorsement  followed  hy  sjjeeial  indorsement 681-683 

Charge  indorscr's  account,  right  to 684 

"  Credit  account  of  witliin  named  payee  " 685-<)86 

Extension  of  time,  release  of  indorser  by 1005 

"  For  identification  only  " 687 

Form  and  language  of  indorsement 688-693 

Guaranty  of  defect  ive  indorsement 696-698 

Guaranty,  drawee's  right  to  require 694-695 

Indorsement  before  payee 703-704 

Indorsement  by  mark 705-707 

Indorsement  by  minor 850 

Indorsement  of  past  due  note 1 105 

Indorser  discharged  by  payment 699 

Indorser  as  guarantor 700 

Indorser's  liability  preserved  by  demand  and  notice 701-702 

Partnership,  indorsement  by 708 

"Pay  any  bank  or  banker " 709-710 

Precise  person  intended,  indorsement  by 711-712 

Prerequisite  of  payment,  indorsement  as 713-717 

"  Prior  indorsements  guaranteed  " 718-724 

Restrictive  indorsement 725-730 

Rubber  stamp 731-736 

Same  name  as  payee,  indorsement  by  person  of 743-744 

Statute  of  Limitations  apjjlied  to  forged  indorsement 605-607 

Transfer  without  indorsement 281 

Warrant  genuineness  of  signature,  indorsement  does  not 737 

"Without  recourse" 734-742 

INTEREST  AND  USURY 

Attorney's  fee  as  cover  for  usury 745 

Blank  space  for  interest  left  in  note 746 

Calculation  of  interest 747-748 

Collection  annually  and  at  maturity 749-752 

Compound  interest 753-755 

Discount  greater  than  legal  rate 756-757 

Legal  rate  collectible  after  maturity 758-759 

Legal  rate  on  loans 760-761 

Maker's  readiness  to  pay  note  stops  interest 1019-1020 

Maximum  legal  rate,  discount  at .' 762-766 

Mmimum  charge  of  one  dollar  for  small  loans 783 

Negotiability  affected  by  interest  clause 767-769 

Parol  evidence  to  prove  usury 770 

Partial  paj'ment  applied  to  reduce  interest 771 

Payment  of  interest  in  advance 772-773 

Pajinent  of  principal  before  maturity 774-776 

Penalty  for  usury 777-778 

Rate  on  loans  outside  of  state 779-782 

Slight  excess  interest 784 

Usury  pleaded  as  defense 785-786 

INTOXICATING  LIQUOR 

Interstate  shipment 418—419 

xiv 


LEGAL  TENDER 

Opinion  Numbers 

Deposit  in  gold  coin  payable  in  legal  tender 787 

Legal  tender  qualities  of  money 788 

Legal  tender  substitute  for  gold  coin 789-790 

Standard  silver  dollars 791 

LETTERS  OF  CREDIT 

Duplicate  for  lost  letter 813 

Forgery  against  lost  letter 812 

Payment  of  overdrawn  letter 1058-1059 

LIBEL  AND  SLANDER 

Derogatory  statements  affecting  l^anks 792-797 

Publication  of  names  of  bank  debtors  in  "delinquent  book" 191 

Slander  of  bank  depositor 190 

LIENS 

Collecting  bank's  lien  on  paper  forwarded 421-422 

Judgment  lien  against  bankrupt's  estate 214 

Lien  of  national  bank  for  stockholder's  indebtedness 230-232,  236 

Lien  of  state  bank  for  stockholder's  indebtedness 228-229,  233-235 

Lien  on  dividends  of  pledged  stock 237-238 

Lien  on  security  pledged  for  specific  debt 1063-1066 

Mechanic's  lien  affected  by  trade  acceptance 1330 

Negotiability  of  vendor's  lien  note 903 

Priority  between  mortgage  and  mechanic's  lien 86S 

LOAN  AND  DISCOUNT 

Bank  as  agent  to  procure  loan li>7 

Bank  as  borrower  on  personal  note  of  executive 168 

Legal  rate,  discount  greater  than 756-757 

Legal  rate  of  interest  on  loans 700-761 

Limit  of  loan  by  national  bank S75-S81 

Loan  to  bank  official  restricted 183 

Maximum  legal  rate,  discount  at 762-766 

One  dollar  minimum  charge  for  small  loans 783 

Power  of  national  bank  to  loan  on  mortgage 884 

Rate  of  interest  on  loans  outside  of  state 779-782 

Rebate  of  interest  on  prepaid  loan 771 

LOST  AND  STOLEN  PAPER 

Check  indorsed  in  blank  followed  by  special  indorsement 682 

Check  signed  in  blank  and  stolen 800 

Checks,  duplicate  for S17-S18 

Checks  lost  in  mail 798-799 

Duplicate  for  stolen  draft . .  803,  826 

" Duphcate  unpaid"  on  draft,  effect  of S27 

Duty  of  care  of  check  book 304 

False  statement  that  certificate  of  deposit  is  lost 281 

Forged  countersignature  of  lost  traveler's  check 609 

Forged  draft  against  lost  letter  of  credit 619,  812 

Government  bonds,  duplicates  for 819 

Holder  in  due  course  of  stolen  paper 801-805 

Indemnity  bond  for  issue  of  duplicate 824-826 

Instrument  indorsed  in  blank  and  stolen .  .  806-811 

Letter  of  credit 812-813 

Passbook 814-816 


LOriT  AND  STOLEN  TAPEIl— Continued 

Opinion  NumbtTH 

Stock  corf  ificafo,  dviplicatc  for  lost 820-823 

Substituted  |)rcs(Mitiiicnt  wlicu  check  is  lost 798,  817-818 

Unackuowlcdficd  items,  duty  to  trace 420-427 

Unsigned  bunk  currency  stolen  and  circulat<'tl 828 

MAIL 

Accejitance  of  ofTer  by  nuiil 829 

Bank's  negligence  in  mailing  draft  to  wrong  person 586,  594 

Checks  and  drafts  lost  in  the  mail 798-799 

Gift  of  bank  draft  through  the  mail 830 

Loss  of  registered  mail 831-833 

Point  of  time  when  check  received  through  mail  is  paid 300-301 

MARRIED  WOMEN 
See  also  Husband  and  Wife 

Account  opened  vmder  maiilen  name 468 

As  surety  and  accommodation  party 834-843 

MATURITY 

Bank's  right  to  charge  to  customer's  account  at  maturity  of  note 1179 

Certificate  of  deposit,  maturity  of 266-268,  278 

Collection  of  interest  at  maturity 749-752 

Days  of  grace  abolished 962 

Instrument  maturing  on  Saturday 654-657 

Legal  rate  of  interest  collectible  after  maturity 758-759 

Maturity  of  notes 986-989 

Negotiable  instruments  in  Illinois,  maturity  of 660 

Notes  payable  at  bank  equivalent  to  order  to  pay  at  maturity 1007-1010 

Notes  payable  at  bank  presented  after  maturity 1008,  1336 

Overdue  trade  acceptance  presented  after  maturity 1335-1336 

Payment  of  principal  before  maturity  not  usurious 774-776 

Protest  after  maturity 1139 

MINORS  AND  INCOMPETENTS 

Contracts  of  persons  under  guardianship 844 

Liability  of  minor  as  stockholder 845 

Payment  by  bank  to  incompetent  depositor  unsafe 846-847 

Payment  of  check  to  infant  agent 848 

Withdrawal  of  deposit  by  minor 849-850 

MISCELLANEOUS  TOPICS  PERTAINING  TO  THE  FORM  AND  LANGUAGE  OF  INSTRUMENTS 

Bond  to  protect  against  payment  upon  unauthorized  indorsement 181 

Certificate  of  deposit  subject  to  attachment 125 

Certification  "good  if  presented  within  five  days " 38 

Certification  stamp  including  amount  disadvantageous 49 

Check  payable  " to  order  of  payee  shown  on  back" 324 

Clauses  inserted  in  trade  acceptances 1328,  1332-1333 

Deed  for  annuity 444 

Disclaimer  of  liability  for  negligence  of  collecting  bank 3S4-3S5 

Disclaimer  of  liability  for  payment  of  stopped  check 1242-1244 

Excess  collateral,  appUcation  to  " any  other  claims" 1064 

Form  and  language  of  indorsement ." 688-693 

Form  authorizing  mailing  paper  direct  to  drawee 385 

Form  of  note  to  make  indorsers  liable  as  sureties 700 

Guaranty  by  indorsers  of  check-drawer's  signature 513 

xvi 


MISCELLANEOUS  TOPICS  PERTAINING  TO  THE  FORM  AND  LANGUAGE  OF  INSTRUMENTS 

Continued 

Opiuiiin  Numbers 

Instrument  drawn  on  check  form  paj-able  at  future  date 312 

Letter  of  credit  to  safeguard  against  overdraft 1059 

Negotiability  of  draft,  form  to  restrict 725 

Note  retaining  lien 903 

Note  securing  warehouse  collateral 1079 

Notice  of  dishonor 1030 

Payroll  checks  to  protect  against  loss 339 

Pledge  whereby  pledgor  retains  possession 1077 

Receipt  as  substitute  for  counter  check 296 

Set  off  of  unmatured  note  against  insolvent  borrower 1230 

Two  accounts,  check  where  depositor  has 1220 

MISTAKE 

Certificate  of  deposit  issued  for  erroneous  amount 273 

Legacy  paid  by  mistake 1055 

Mistaken  credit  to  account 494—495 

Money  paid  without  consideration  recoverable 631,  1052,  1057 

Payment  of  check  without  funds 1054 

Payment  of  deposit  by  mistake 4S4-4S5 

Payment  of  draft  by  mistake 1053 

Revocation  of  mistaken  certification  of  stopped  check 4S 

MORTGAGES 

Chattel  mortgages 857-863 

Foreclosure 864 

Mortgage  in  name  of  cashier 856 

Mortgage  indebtedness  payable  in  gold  coin 790 

Mortgage  notes S65-S67 

Power  of  national  bank  to  loan  on  mortgage 884 

Priority  between  mortgage  and  nieclianic's  lien 868 

Provision  in  mortgage  governs  interest  clause  in  note 752 

Wrong  description  in  mortgage S09 

NAMES 

Assumed  name,  opening  account  under 4u'> 

Deposit  in  two  names 502 

Garnishment  notice  with  incorrect  name 131-132 

Indorsement  by  person  of  same  name  as  payee 585-590 

Mortgage  given  to  bank  in  name  of  cashier 856 

"  Mrs."  not  part  of  name 689 

Right  to  change  name 1345 

NATIONAL  BANKS 

Advertising  for  "savings"  account S70 

Branch  banks  not  permitted 2''>5 

Cashier  need  not  be  director 197 

Deposits  with  trust  company  permitted 871 

DouI>le  liability  of  stockholder 223-224, 1200 

Examination  by  revenue  officer 872 

Federal  jurisdiction 873 

Guaranty  of  draft  in  which  it  has  no  beneficial  interest 874 

Increase  of  national  bank  stock 225 

Lien  for  indebtedness  of  stockholder 230-232,  236 

Limit  of  loan  by  national  bank 875-88 1 

Loan  on  certificates  of  deposit 882 

xvii 


NATIONAL  BANKS— Continued 

Opinion  NumberR 

Loan  on  shares  of  stock  proliilutcd 882 

Miniinuiii  charge  on  small  loans 783 

National  l)ank  as  surety 885-886 

Power  to  act  as  broker 193 

Power  to  donate  services  of  clerk 883 

Power  to  loan  on  mortgage 884 

Publication  of  unclaimed  deposits -WS 

Kate  of  interest  on  loans  outside  of  state 779 

State  taxation 1321-1325 

Transfer  of  stock 1339-1342 

Trust  powers 887 

Usurious  discount  and  penalty 745,  750,  777 

NEGLIGENCE 

Attorney's  delay  in  bringing  suit 1343 

Circuitous  method  of  presentment  of  check  not  neghgent 370-372 

Collecting  bank  forwarding  paper  direct  to  drawee 398-409 

Collecting  bank's  violation  of  instructions 394-396 

Disclaimer  of  liability  for  maiUng  check  direct  to  drawee 384-385 

Disclaimer  of  liability  for  mistaken  payment  of  stopped  checks 1242-1244 

Duty  of  care  of  check  book 304 

Duty  of  care  in  preparing  check 341-344 

Failure  to  present  for  acceptance 388 

Failure  to  trace  unacknowledged  items 426-427 

Liability  for  loss  of  registered  mail 831-833 

Liability  of  telegraph  company  for  forged  telegrams 564-566 

Mailing  check  to  wrong  person 588,  590,  594 

Safe  depositary  responsible  for  negligence 472 


NEGOTIABILITY 

Acceptance  indorsed  on  back  of  bill 888 

Certainty  as  to  payee 889-S90 

Certainty  of  place  of  payment 891 

Certainty  of  time  of  payment ■  •  •   892-S93 

Certificate  of  deposit 276-277 

Certificate  of  stock 808,  894-S95 

Check  paj'able  to  payee  only 83, 287 

Certificate  of  deposit  payable  "in  current  funds" 271-272 

Clause  confessing  judgment 978-9S4 

Costs  of  collection  and  attorney's  fees 151-163 

Extension  clause 896-900 

" In  exchange"  instrument  payable 901 

Instrument  must  be  negotiable  to  justify  protest 1140-1146 

Instrument  stamped  by  protect ograph 343 

"Not  payable  through  express  company,"  effect  of  provision 325-327 

Note  reciting  executory  consideration 902 

Note  retaining  lien  upon  property 903 

Note  secured  by  mortgage 865,  867 

Note  secured  by  warehouse  collateral 1079 

Passbook  of  savings  bank  non-negotiable. . . .' 814,  1038-1040 

Provisions  destroying  negotiability 287,  892,  1145 

Provisions  regulating  payment  of  interest 767-769 

Statement  of  "particular  fund" 323, 1140 

Trade  acceptance 1331-1333 

Undated  checks 356-358 

Use  of  seal • 995-993 

Waiver  of  protest  and  exemptions,  effect  of 904 

xviii 


NEGOTIABILITY— Continued 

Opinion  Numbers 

Warehouse  receipt 905 

Warrant  drawn  for  municipal  debt 906 

Words  affecting  negotiability 907-909 


PROVISIONS  IN  THE  NEGOTIABLE  INSTRUMENTS  LAW  REFERRED 
TO  IN  THE  FOLLOWING  TOPICS 

Accommodation  indorser's  liability 71 

Attorney's  fee  stipulation 151-155 

Blank  space  filled  in  "strictly  in  accordance  with  authority  given" 285, 960 

Certification  must  be  in  writing 15 

Check  is  not  an  assignment 454-455 

Check  signed  in  blank  and  filled  in 294 

Circuitous  routing  of  checks 370 

Computation  of  time 987 

Days  of  grace  abolished 4r),  962 

Drawee's  liability  upon  stop  payment 1255 

Form  of  notice  of  dishonor 1030 

Indorsement  before  payee "03 

Indorsement  in  blank  followed  by  special  indorsement 681 

Indorser's  liability  ns  affected  by  agreement 73 

Negotiation  of  check  within  reasonable  time 801 

Notes  paj^able  at  bank 1007-1018 

Presentment  on  Saturday 654-<')55 

Protest  must  be  under  hand  and  seal  of  notary 1111 

Rule  allowing  drawee  24  hours  to  accept 43 

Statement  of  "particular  fund"  in  instrument 323, 1140 

Surety  maker  not  discharged  by  extension  of  time 963,  967-968 

Undated  checks 357-358 

Waiver  of  protest •  •  •  ■         1 1"3 

Words  and  figures  differ 3»)3 

NOTARIES 

Acknowledgment  by  party  in  interest 910 

Acknowledgment  over  telephone 911-912 

Certificate  of  protest 1111-1112 

Competency  of  bank  officers,  directors,  stockholders  and  employees 91  !~957 

Employee  of  member  of  Federal  Reserve  Bank  as  notary '  1'>1 

Form  of  acknowledgment •*'*'^ 

Notary's  fee  in  Alabama 913 

Protest  by  Justice  of  the  Peace ^ '  '^ 

Protest  by  notary's  clerk 1 ' '  1 

Relationship  to  mortgagee  does  not  disqualify 9^ 

NOTES 

Accommodation  maker  not  released  by  extension  of  time •         1006 

Accommodation  notes 100<>.  1022 

Alteration  of  note •♦<''  ^  \-^ 

Attorney's  foe  notes 149- Hm 

Bank  as  holder  of  director's  note 1^ 

Blank  space  filled  "  in  accordance  with  authority  " 9t>0 

Blank  space  for  interest '"*" 

Cashier  buying  his  own  note  for  bank ^" 

Collateral  notes,  enforcement  of 1069-10/ 1 

Corporation  note,  accommodation  indorser's  liability 76-77 

Days  of  grace  abolished ^"'^ 

Demand  notes 1188-1190 

xix 


NOTt:;^     Continued 

Opinion   Numbers 

Dishonor  of  nolo  payiil)!^  in  inHtalnicnU 102H-1029 

Knforceinont  by  holder 909-972 

Extension  of  time  of  payment 903-908 

Holder  in  due  course  of  redi.scounted  note ^^5 

Inipos!sil)le  date,  note  with 974 

Indorser  released  by  extension  of  time 1005 

Joint  and  several  notes 975-977 

Judf^ment  notes 978-984 

Lopal  tender,  payable  in 789-790 

Liai)iiity  of  surety 985 

Maturity  of  notes 9S0-989 

Mortgage  notes 865-807 

Negotial)ility  of  notes 889-900 

Note  collected  by  agent  without  authority 990 

Note  governed  by  law  of  place  where  payable 973 

Renewals 991-994 

S.-al,  use  of 995-998 

Signature  on  corporation  note 434-^38 

Statute  of  limitations  on  demand  note 999-1003 

Warehouse  collateral,  secured  by 1079 

''With  exchange",  containing  words 1004 

NOTES   PAYABLE  AT  BANK 

Equivalent  to  order  to  paj'  at  maturity 1007-1010 

Express  instructions  to  pay 1011-1015 

Liability  of  maker  when  note  not  presented 1019-1020 

Maker's  readiness  to  pay  stops  interest 1019-1020 

Negotiable  Instruments  Law,  application  of 1016-1018 

Partial  payment  where  funds  insufficient 1210 

Payment  after  maturity 1021 

Stopping  payment 1249-1252 

Subsequent  deposit  cannot  be  applied 425,  1210 

NOTICE  OF  DISHONOR 

Accommodation  indorser  entitled  to  notice 1022-1024 

Duty  to  notify 1025-1027 

Necessary  to  hold  indorser 1 149 

Notice  upon  default  of  instalment 1028-1029 

Not  required  where  indorser  is  accommodated  party 1109 

Provisions  in  Negotiable  Instruments  Law 1030 

Should  be  given  within  reasonable  time 1031 

Sufficiency  of  notice 1031 

Surety-maker  not  entitled  to  notice 1032-1033 

Waiver 1034-1036 

Waiver  of  protest  includes  demand  and  notice 1170-1176 

OVERDRAFT 

By  director 203 

Certification  of  overdraft  illegal 35 

Pa\nncnt  and  credit  of  overdraft  as  deposit 1347-1350 

Payment  of  overdrawn  letter  of  credit 1058-1059 

Payment  from  subsequent  deposit 393 

Payment  to  bona-fide  checkholder 1054 

Right  to  charge  back  overdraft 297 

Recourse  by  bank  which  pays  overdraft 1347-1350 

WTiere  depositor  has  two  accounts 1220-1223 

XX 


PARTNERSHIP 

Opinion  Numbers 

Bank  stock  issued  in  name  of  firm 239 

Deposit  by  partnership 487-488 

Partnership  indorsement 708 

Payment  of  partnership  checks  to  survivor  in  case  of  death 334 

Set  off  against  individual  account  of  partner 1217-1219 

PASSBOOKS 

Assignment  of  passbook 1037-1040 

Credit  of  overdraft  irrevocable 1347-1350 

Delivery  necessary  to  complete  gift  of  deposit G07 

Duty  of  examination  by  depositor 49G,  1041 

Garnishee  bank  requires  return  of  passbook 141 

Lost  passbook 814-81G 

Nature  of  passbook 1042 

Presentation  of  savings  passbook 1043 

Provision  in  passbook  to  protect  bank  against  crediting  overdraft 1347-1350 

Rules  in  savings  passbook 1044-1045 

PAYMENT 

Acceptance  of  check  "for  full  payment  of  account" 307-311 

After  banking  hours 1 

After  notice  of  assignment 1040-1047 

Application  of  payment 1048-1049 

Bank's  refusal  to  pay  duly  presented  check 345 

Conditional  payment  by  check 1050-1051 

Crediting  depositor's  account  with  checks  on  same  bank  operates  as  payment 297-298 

Exchange  charge 305-30G 

Extension  of  time  of  payment 963-908,  991-991 

"In  current  funds" 271-272 

Indorsement  of  check  as  prerequisite  of  payment 713-717 

"In  exchange" 31.>-316 

Interest  paid  in  advance 772-773 

Legal  tender 787-791 

Minors  and  incompetents,  payment  to S4G-8.')5 

Mistake,  pajnnent  by 1052-1057 

Note  payable  in  instalments 102S-1029 

Official  check  for  private  use,  payment  unsafe 32S-332 

Overdraft  paid  or  credited  as  a  deposit 1347-13r»0 

Overdrawn  letter  of  credit 105S-1059 

Order  in  which  checks  for  more  than  balance  should  be  paid 318-322 

"Paid"  stamp  on  check 35;i-354 

Partial  payment lOtW) 

Payment  of  check  after  drawer's  death 449-4(il 

Payment  of  check  on  holiday G59-()03 

Payment  of  checks  with  suspicious  appearance 340 

PajTnent  of  note  payable  at  bank  after  maturity 133G 

Payment  of  note  payable  at  bank  at  maturity 1007-1010 

Payment  of  principal  before  maturity 774-770 

Payment  on  rubber  stamp  indorsement  unsafe 735 

Payment  upon  indorsement  of  precise  person  intended 711-712 

Payment  upon  indorsement  of  person  of  same  name  as  payee 743-744 

"With  exchange" 1061 

PLEDGE  AND  COLLATERAL 

Accounts  receivable  as  collateral 10G2 

Application  of  surplus  security  pledged  for  specific  debt 1063-1066 

Bank's  power  to  pledge  its  assets 185 

Bond  for  title  as  security 1067 


I'LEDGE  AND  COLLATERAL— Continued 

opinion  Numbers 

Corporate  stork  plodKccl  as  collateral 1068 

Enforcement  of  collateral  notes 1060-1071 

Lib(>rty  bonds  as  (collateral 1072 

Lien  on  dividends  of  jjled^ed  stock 237-238 

Life  insurance  j)oliey  a-ssi^ned  as  collateral 1073 

Passbook  assigned  as  collateral 1037-1040 

Power  of  attorney  to  sell  collateral 1074 

Sale  of  collateral  on  outlawed  note 1075 

Securities  guaranteed  l)y  salesman 1076 

Warehouse  receipt,  validity  as  pledge 1078-1081 

War  Savings  certificates  as  collateral 1082 

What  constitutes  valid  pledge 1077 


POSTDATED  CHECKS 

Certified  checks 12-14 

Duty  of  collecting  bank 1083 

Payment 1084r-1089 

Protest 1090-1095 

Set  of! 1096 


POWER  OF  ATTORNEY 

Power  of  attorney  affected  by  death 462 

Power  of  attorney  to  sign  checks 351 


PRESENTMENT 
See  Collection 

At  branch  banks 261-264 

Circuitous  routing  of  checks 370-372 

Duty  of  collecting  bank 386-390 

Forwarding  paper  direct  to  drawee 398-409 

Necessity  of  presentment 701-702 

Over  telephone 109S-1099 

Place  of  presentment 1100-1104 

Presentment  for  acceptance 388,  1083 

Presentment  of  check  a  second  time 1154-1156 

Reasonable  time  for  presentment 1105-1108 

Rule  to  allow  drawee  24  hours  for  acceptance 43-46 

Simultaneous  presentment  of  checks  for  more  than  balance 318-322 

Substituted  presentment  when  check  is  lost 798,  817-818 

When  presentment  excused 1109 

PROTEST 
See  Notice  of  Dishonor 

Altered  check 1110 

Certificate  of  protest 1111-1112 

Checks  payable  in  one  state  and  negotiated  in  another 1113 

Demand  over  telephone  does  not  justify  protest 109S-1099 

Drawee's  duty  of  protest 1115-1117 

Duty  of  collecting  bank 1118-1119 

Fees 1120-1121 

For  better  security 1122 

Forged  checks 1123-1125 

Formal  protest 1126-1128 

xxii 


PROTEST— Continued 

Opinion  Nambers 

Indorsement  of  check  incorrect 1129-1130 

Indorsement  on  instrument  lacking 1131-1134 

Inland  and  foreign  bills  of  exchange  distinguished 1135-1136 

Instructions  to  protest 1137-1139 

Instrimient  must  be  negotiable 1 140-1 146 

Not  abolished  in  any  state 1 147 

Notice  of  protest 1025-1027 

Payment  of  protested  check 1114 

Permissible  but  not  compulsory 1 148-1 149 

Persons  authorized  to  make  protest 1150-1151 

Place  of  protest 1152-1153 

Postdated  checks 1090-1095 

Second  protest  of  check 1154-1 15G 

Signature  on  instrument  lacking 1 157 

Stopped  check 1 158-1 159 

Surety-maker  of  note  not  entitled  to  protest 967 

Time  of  protest 1 160-1 169 

Waiver 1 170-1 176 


SAVINGS    DEPOSITS 

Account  of  husband  in  trust  for  wife 068 

Attachment  and  garnishment  of  savings  deposits 141-142,  144-145 

Notice  of  withdrawal 282 

PajTiient  on  production  of  passbook 1043 

Rules  in  saving  passbook 1044-1045 

Savings  account  as  time  deposit 497 

Savings  deposit  in  national  bank 504 

Savings  deposits  not  exempted  from  taxation 1314 

Set  off  where  depositor  has  savings  and  chocking  accounts 1220-1221,  1223 

l^se  of  word  "savings" ISS,  S70 


SET  OFF 

Collection  proceeds  set  off  against  bankrupt .-. . .  1 177 

Consent  of  depositor  required  in  Louisiana 1 178 

Consent  of  depositor  unnecessary 1179-1 181 

County  warrant  set  off  against  deposit  of  county 1 182 

Debt  protected  by  collateral 1 183-1 185 

Debt  must  be  contracted  in  good  faith 1 186 

Debt  of  presenting  checkholdcr 1 187 

Demand  note 118.8-1190 

Deposits  impressed  with  trust  character 1  I'M 

Deposit  received  after  maturity  of  note 1 1'>1 

Deposits  made  in  view  of  insolvency 1 192-1 193 

Depositor's  right  to  set  off  against  insolvent  bank 1206-1209 

Indebtedness  of  decedent,  set  off  against 1 197-1202 

Indorser's  account,  set  off  against 120;j-1205 

Maker's  account  charged  in  interest  of  indorser 1210-1213 

Note  set  off  against  insolvent  l>ank  by  indorser 1214-1216 

Partnership  debt  set  off  against  indivithml  account 1217-1219 

Postdated  check 109*'. 

Set  off  against  city  deposit 1 195 

Set  off  by  bank  to  defeat  attachment 146-148 

Set  off  of  claim  for  interest 1 196 

Stopped  check,  sot  off  after  payment  of 1265 

Unmatured  debt  set  off  against  l)ankrupt 1224-1230 

Whore  depositor  has  two  accounts 1220-1223 

xxiii 


SIGNATURES 

Opinion  Numbers 

Agont  signing  for  principal 605 

Bank  bound  to  know  depositor's  signature 512-617 

Bank's  obligation  to  know  payee's  signature  on  certificate  of  deposit 280 

By  mark  and  witness .' 202,  561-503 

By  power  of  attorney 351 

Comparison  of  signatures 350 

Corporation  signature  on  note 434-438 

Forgery  of  signature  by  mark 561-5G3 

Guaranty  of  signature 179,  617 

Hectograph  signature  valid 349 

Joint  and  several  notes 975-977 

Indorsement  by  mark 705-707 

Indorsement  does  not  warrant  genuineness 737 

Missing  signature 254,  1 157 

Notary's  certificate  signed  by  clerk 1111 

Partly  genuine 348 

Partnership  signature 487-488 

Surety-maker's  signature  after  discount  of  note 985 

Unsigned  bank  currency  stolen  and  circulated 828 

STATUTE  OF  LIMITATIONS 

Begins  to  run  from  maturity  of  note 968 

Certificate  of  deposit 278-279 

Certified  check 39-41 

Checks 1106 

Demand  note ' 999-1003 

Effect  of  payment  of  interest  after  maturity 74 

Forged  indorsements 605-607 

Guaranty  of  payment •. 1003 

Postponement  by  extension  of  time  of  payment 991 

Sale  of  collateral  security  on  outlawed  note •. 1075 

Statute  of  Limitations  against  indorser 74,  100 1 

STOPPING  PAYMENT 

Accuracy  of  notice 1231-1232 

Bank's  liability  for  payment 1233-1235 

Cashier's  and  certified  checks 1236-1241 

Disclaimer  of  liabiUty  for  payment  of  stopped  check 1242-1244 

Duty  to  obey  instructions 1245-1248 

Notes  payable  at  bank 1249-1252 

Notice  holds  good  indefinitely 1253-1254 

Oral  notice 1255-1258 

Practice  of  stamping  "payment  stopped" 1259-1261 

Recovery  by  drawee 1262-1265 

Rights  of  holder  in  due  course 1266-1282 

When  drawer's  right  ceases 301 

Where  instrument  an  assignment 1283-1285 

Where  instrument  not  an  assignment 1286-1289 

SURETIES 

Liability  of  surety 985 

Married  woman  as  surety 834-843 

National  bank  as  surety 885-886 

Surety  company  bond 822 

Surety-maker  not  entitled  to  protest 967 

Surety  not  released  by  extension  of  time 963-968 

xxiv 


TAXATION 

Opinion  Numbcra 

Canadian  bank  notes  and  currency 1290-1292 

Compulsory  disclosure  of  customer's  balance 173-17G 

Corporation  tax  law 1293-1295 

Deduction  of  government  bonds 129G 

Deduction  of  real  estate .  1297-1300 

Deduction  of  taxes , 1301-1303 

Discrimination  in  assessment 1304-1305 

Erroneous  return 130G 

Federal  income  tax  law 1307 

Occupation  tax 1309-1310 

Penalty  of  delayed  return 1312-1313 

Savings  deposits  not  exempted 1314-1315 

Secured  Debts  Tax  Law  of  New  York 1316 

Stamp  tax 1317-1320 

State  taxation  of  national  banks 1321-1325 

Tax  for  fraction  of  year 1308 

Taxation  of  clioses  in  action 1311 

Transfer  tax  of  decedent 1320 

Treasury  notes  subject  to  taxation 1327 


TRADE  ACCEPTANCE 

Acceptance  payable  at  bank  in  another  locality 132S 

Completing  signature  of  drawer  after  acceptance 1329 

Mechanic's  lien  rights,  effect  of 1330 

Negotiability 1331-1333 

Overdue  trade  acceptance  payable  at  Invnk 1335-1336 

Payment  by  acceptor's  bank 1337 

Seller's  right  of  replevin 1338 

Trade  acceptance  propaganda  not  in  restraint  of  trade 1334 


TRANSFER  OF  STOCK 

Duplicates  for  lost  stock  certificates 820-823 

Liability  of  transferor  to  assessment 220 

Bank  stock 240-241 

Book  transfers 1339-1342 

Negotiability  of  certificate SOS,  823,  894-895 

Right  of  bank  as  lienor  to  refuse  transfer  of  stock 228-236 

Stock  of  decedent 463-464 

Transfer  by  delivery 1339-1340 

Transfer  for  protection  of  collateral 1008 

TRUST  COMI'AMlvS 

As  executor  and  guardian 498,  887 

Deposits  of  national  l)ank  with  trust  company 871 

Investigation  of  private  iiffnirs  l)y  Congressional  committee 184 

Power  to  guarantee  dclit  of  another 874 

TRUST  FUNDS 

Trust  funds J'.lS-.-ni 

ULTRA  VIHF>?  ACTS 
Ultra  Vires  Acts ...  .177-178,  823,  874,  884 


VOTING 

Opinion  Numbers 

By  executor  in  name  of  testator 243 

By  trustee  in  bankruptcy 242 

Power  of  American  Bankers  Association  dck^gate 1346 

Rights  of  stockholders  not  voting 225 

Single  sliare  as  voting  unit 439 

Voting  power  of  stoc'khokk>r 440 

WAIVER  OF  PROTEST 

Waiver  of  protest 1 170-1 17t) 

WAREHOUSE   RECEIPTS 

Delivery  of  goods  without  taking  up  receipt 032 

Negotiability 905 

Validity  as  pledge 1078-1081 


Date 

Due 

PRINTED  IN  U.S. o.             CAT.    NO     24    161                Kw 

UC  SOUTHERN '^EG"-"' 


.^,,E^iPY'iC'L'- 


AA    001  264  378 


